Battling to pay off mounds of debt, Conseco Inc. went to work in March, restructuring $1.5 billion in bank loans, extending the maturity on up to $2.54 billion of public debt, and selling its Manhattan National Life.The Carmel, Ind. raised the interest rates on the $1.5 billion bank loan, which is held by a consortium of 51 lenders, 75 basis points. Financial analyst say the move gives the cash-poor financial services firm breathing room to repay investors and stay afloat. The lenders, led by J.P. Morgan Chase & Co. and Bank of America Corp., have also agreed to a proposal to extend the maturity of up to $2.54 billion of Conseco's public bonds. The exchange would postpone $303 million in bond payments due in October by one year and $250 million due in February 2003 by one year.
However, several funds affiliated with New York money manager Angelo, Gordon & Co. filed suit seeking a judgment that could derail Conseco's bank-debt restructuring plan.
According to the suit filed March 28 in U.S. District Court in Chicago, the plaintiffs claim they either didn't sign the renegotiated agreement or signed but rescinded the signature. As a result, they contend, Conseco remains obligated to make payments required under the loans' previous terms. The suit seeks a declaratory judgment, as well as attorneys' fees, costs and other relief.
Conseco denied the allegations.
Conseco did receive a clean bill of health from its auditors April 1. In its much-anticipated 2001 annual report, the financial services company got an unqualified opinion from independent accountants PricewaterhouseCoopers LLC and said it had plans to generate enough cash to cover about $1 billion in debt payments in 2002.
Meanwhile, American Financial Group Inc. said its Great American Financial Resources Inc. unit reached an agreement to buy Conseco's Manhattan National Life Insurance Co. for $48.5 million in cash. The transaction is expected to close in the second quarter. Manhattan National Life has about 90,000 policies in force representing over $ 12 billion in face amount of insurance, statutory assets of $297.8 million and statutory capital and surplus of $23.1 million.
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