Conseco predicts quick recovery
By Mark Jewell
Associated Press
INDIANAPOLIS — Conseco Inc. said yesterday it plans a quick exit from bankruptcy court protection, even though a group of creditors threatened to delay the insurance and finance company's reorganization.
Associated Press
Conseco — mired in debt from 1990s acquisitions that backfired, including the ill-fated $6 billion purchase of a mobile-home lender — late Tuesday became the third-largest U.S. company to file for bankruptcy protection.
Workers arrived as usual yesterday at Conseco Inc.'s headquarters in Carmel, Ind. The firm on Tuesday filed the third-largest bankruptcy in U.S. history, with $6.5 billion in debt.
The Carmel, Ind.-based company, which employs about 14,000 people and had $8.1 billion in revenues last year, expects to emerge from Chapter 11 protection before the middle of next year, the company's lead attorney told a bankruptcy court in Chicago.
Banks and bondholders reached a tentative bankruptcy agreement with Conseco over the $4 billion those groups are owed.
But a group of preferred shareholders — who were left out of talks begun in August to restructure Conseco's debt, but eventually won a seat under protest — have held out. They continue negotiations with Conseco.
Preferred securities holders carry privileges over owners of common stock in recovering their investments from failed companies, but rank below banks and bondholders.
Conseco owes more than $1.9 billion to preferred investors. Steven Jones, a business finance professor at Indiana University, gives the preferreds' "a very low probability" of recovering their investments. Common stockholders, too, are expected to recover little if any of their money.
Details of Conseco's Chapter 11 plan must be approved by investor groups before a reorganization plan can be submitted for the court's approval. The plan could be submitted within four to six weeks, a Conseco spokesman said.
Under the proposal, St. Paul, Minn.-based Conseco Finance Corp. would be sold to a group of investors. Conseco Finance, which is insolvent, grew out of the parent company's costliest acquisition, the $6 billion purchase of Green Tree Financial Corp. in 1998. That unit, specializing in high-risk mobile home loans, became a burden as loan default rates rose.
Conseco Finance has tentatively secured $125 million in debtor-in-possession financing so it can operate during bankruptcy.
Conseco's bankruptcy filing does not include Conseco's insurance operations, which the company and insurance regulators say remain financially sound. Conseco is the nation's seventh-largest insurer.
Conseco is the third-largest firm to file for bankruptcy protection in the United States. The company and its subsidiaries had $61.4 billion in assets at the end of 2001.
WorldCom's assets at its July filing totaled $104 billion. Enron had $64 billion when it filed last December.
Before Tuesday, the third-largest bankruptcy was the 1987 filing by Texaco, which had nearly $36 billion in assets at the time. With last week's filing by United Airlines' parent company and now Conseco's, seven of the 12 largest bankruptcies since 1980 have been filed this year.
