Conseco Inc. files for bankruptcy
By Mark Jewell
Associated Press
INDIANAPOLIS In the third-largest bankruptcy in U.S. history, Conseco Inc. filed for Chapter 11 protection after four months of talks with creditors to restructure the insurance and finance company's $6.5 billion in debt.
Employment: About 13,000 Major operations: Carmel, Ind.: corporate headquarters and home to life insurance operations, annuity operations, Conseco Capital Management and Conseco Risk Management; 3,348 employees as of December 2001. Chicago: Bankers Life and Casualty; 1,651 employees. Rockford, Ill.: major medical operations; 454 employees. Philadelphia: Conseco Direct Life Insurance Co. and Conseco's direct marketing organization; 437 employees. St. Paul, Minn.: Conseco Finance Corp.; 1,160 employees. Rapid City, S.D.: Conseco Finance Corp.'s manufactured housing division; 2,567 employees. Tempe, Ariz.: Conseco Finance Corp.'s consumer finance division; 3,501 employees. Assets: $52 billion, as of Sept. 30. 2001 revenue: $8 billion, ranking Conseco No. 239 on 2002 Fortune 500 list of U.S. companies. Losses: $6 billion in first three quarters of 2002 Source: Conseco Inc.
Terms were negotiated before last night's filing in U.S. Bankruptcy Court in Chicago, said Conseco spokesman Mark Lubbers. Conseco, the nation's seventh-largest insurance provider, was seeking a judge's approval of an agreement with several of the company's stakeholders.
Conseco Inc. at a glance
Banks and bondholders who took part in the talks reached terms with Conseco, but holders of preferred securities did not, Lubbers said. Talks will continue with those investors, Lubbers said.
Although the filing was not surprising given Conseco's recent woes, it marked a dramatic downfall for a company whose stock was once a Wall Street darling.
From 1988 to 1998, the company's stock averaged a total return of 47 percent per year and Conseco shares traded as high as $58. Today, the stock trades at less than a nickel per share.
Under the most commonly used measure to rank bankruptcies, Conseco's ranks third in the United States based on the $52.3 billion in assets the company and its subsidiaries reported as of Sept. 30.
WorldCom's total assets at its July filing were $104 billion, followed by Enron's $64 billion.
Before Conseco's filing, the third-largest bankruptcy was the 1987 filing by Texaco, which had nearly $36 billion in assets at the time. Adjusted for inflation, that amount would be more than $56 billion today, according to the research Web site BankruptcyData.com.
Conseco maintains the use of assets to measure bankruptcies is inappropriate in its case because its insurance operations are not included in the bankruptcy filing. Also, Conseco says its debt entering bankruptcy is much smaller than several other companies' debts at the time they filed.
The filing follows a yearslong tailspin after the conglomerate's aggressive acquisition strategy in the 1990s backfired.
Company founder Stephen Hilbert was ousted in April 2000 after piling up $8.2 billion in debt. Federal regulators are investigating the company's accounting around the time of Hilbert's resignation and his replacement by Gary Wendt.
The decline in Conseco's financial condition accelerated in recent months, leading to Wendt's Oct. 3 resignation. He had received a $45 million signing bonus when he was hired.
Wendt, who remained board chairman, said as recently as May 1 that Conseco's short-term debt problems were behind it, and that he was confident about next year's prospects. Those statements and other reassurances from Conseco executives led to the filing of a string of recent shareholder lawsuits.
Conseco has also suffered a series of downgrades by Wall Street credit rating agencies. Those downgrades, combined with bankruptcy fears, have hurt the ability of Conseco's insurance and finance subsidiaries to keep existing customers and attract new ones.
Company officials have said Conseco's insurance subsidiaries have remained fundamentally sound despite the parent company's debt problems. However, the finance division, Conseco Finance, is insolvent after failing to make a $4.7 million payment due Dec. 4.
The filing covers Conseco Inc., the parent company, as well as St. Paul, Minn.-based Conseco Finance Corp. and its consumer finance subsidiaries. Conseco's insurance operations are not included in the filing, Lubbers said.
Conseco is based in the Indianapolis suburb of Carmel.
A history of Conseco Inc.:
1979: Stephen Hilbert and David E. Deeds found Security National of Indiana Corp., predecessor of Conseco.
1983: Security National buys Consolidated National Life Insurance Co.; company changes its name to Conseco Inc.
1986: Conseco shares begin trading on New York Stock Exchange.
1988: Co-Chief Executive Deeds departs, leaving Hilbert as president and CEO.
1996: Conseco named to Fortune 500 following several acquisitions.
1998: Conseco shares reach all-time high of $58; Conseco buys Green Tree Financial for $6 billion in a deal that leads to heavy losses.
April 2000: After earnings fall far below expectations and debt reaches $8.2 billion, Hilbert resigns under pressure along with chief financial officer Rollin Dick.
June 2000: Gary Wendt replaces Hilbert, announces turnaround plan to reduce debt.
Aug. 9, 2002: Wendt abandons turnaround plan after cutting $2 billion in debt, begins restructuring talks with creditors.
Oct. 3, 2002: Wendt resigns as chief executive but remains as board chair while restructuring talks continue.
Nov. 19, 2002: Conseco posts quarterly loss of $1.8 billion, says it will file Chapter 11 if it can reach agreement with creditors.
Dec 17, 2002: Files Chapter 11 bankruptcy after reaching agreement with two of three creditor groups.
Source: Conseco Inc.