Conseco Files Reorganization
By MARK JEWELL 01/31/2003 23:11:34 EST
Conseco Inc. on Friday filed a reorganization plan that spells out the insurance and finance company's plans to emerge from Chapter 11 bankruptcy.
Banks and bondholders are first in line to recover their investments in Conseco, which became the third-largest U.S. company to file bankruptcy when it sought Chapter 11 protection in December. Common shareholders are last in line, and expected to recover little, if any, of their investments.
The reorganization plan was filed shortly before a company-imposed midnight deadline in U.S. Bankruptcy Court in Chicago. The plan followed a tentative pre-bankruptcy agreement the company reached with banks and bondholders to restructure $6.5 billion in debt, the legacy of soured 1990s acquisitions.
That agreement did not reveal many details of Conseco's reorganization, including whether current executives would remain or be replaced by representatives for the investor groups.
Analysts have said bondholders likely will have the biggest say in Conseco's near-term future, and could gain control by swapping their debt for equity ownership. Banks could gain warrants that would give them a controlling interest if Conseco's new management fails to achieve debt-reduction targets.
Another investor group - holders of trust-preferred securities, who rank below banks and bondholders - failed to reach agreement with Conseco on its future. But they won formal representation in Conseco's case in U.S. Bankruptcy Court.
Lawyers representing preferred investors, who hold $2 billion in debt compared with the $2.5 billion held by bondholders and $1.5 billion held by banks, expect to continue negotiations with Conseco.
Conseco, based in the Indianapolis suburb of Carmel, expects to emerge from bankruptcy this spring, with hopes of cutting its $6.5 billion in debt to $1.4 billion.
Conseco's bankruptcy filing, which excluded its profitable insurance subsidiaries, listed $52.3 billion in assets and $51.2 billion in debts.
The company employed about 14,000 people at the end of 2001 - the most recent date the company has released an employment number - but has laid off workers since then. It had $8.1 billion in revenues that year.
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