Conseco's losses may lead to Chapter 11
By Mark Jewell
Associated Press
INDIANAPOLIS — Conseco Inc. said yesterday a bankruptcy filing could be near as it disclosed a $1.3 billion quarterly loss and said federal regulators were investigating its accounting.
The insurance and finance company attributed the huge loss to a $2.95 billion writedown for goodwill reflecting a decrease in the value of its assets.
The earnings performance and writedown caused shareholders' equity to plunge from more than $4.7 billion on Dec. 31 to $533 million at the second quarter's end June 30.
In yet another blow, rating agency A.M. Best yesterday downgraded its rating of Conseco's insurance operations, hurting the company's ability to operate during restructuring.
Conseco, which announced Friday it was putting off bond interest payments and radically restructuring its debt and operations, said it would seek bankruptcy protection if it could not agree with creditors on restructuring.
Conseco said the accounting inquiry "relates to events in and before the spring of 2000, including the company's accounting for its interest-only securities and servicing rights."
In April 2000, company founder and chief executive Stephen Hilbert and his chief financial officer were forced to resign after piling up $8.2 billion in debt through an aggressive acquisition strategy in the late 1990s.
Conseco, based in the Indianapolis suburb of Carmel, eventually restated financial results for most of its 1999 fiscal year by nearly 40 percent. Last week, a federal judge approved a $120 million settlement in a 2-year-old shareholder lawsuit that alleged executives failed to disclose key facts about the company's financial health.
In its long-delayed earnings release yesterday, the company said it took a $1.3 billion loss, or $3.86 per share. That compared with a loss of $30.3 million, or 9 cents a share, in the year-ago period. Excluding one-time charges, quarterly operating earnings were $1.3 million, compared with $70 million a year ago.
"We cannot predict whether any restructuring will be effected out of court or through a Chapter 11 bankruptcy proceeding, nor can we predict how long any restructuring of our debt will be required to implement," the company said in its 10-Q filing with the SEC.
