Conseco Criticizes Moodys Ratings Action, Says Cash-Raising Is Going Fine
Executives at Conseco Inc. are urging credit analysts to focus on the companys prospects for the future, rather than harping on the losses the company reported for the first quarter.
Moodys Investors Service, New York, made the headlines last week by cutting its credit ratings on certain senior Conseco notes two notches, to Caa1.
Moodys predicted in March that it would probably cut the ratings on the senior notes one notch.
“However,” Moodys says, “since then, Consecos slower than anticipated progress in generating cash from reinsurance and other transactions and its continued weak net income performance from its finance and insurance subsidiaries lead Moodys to believe that the possible risks of bankruptcy for Conseco are more problematic.”
Conseco must make a $193 million optional bank payment in September, or else the payments due in 2003 will increase to $1.8 billion, from $600 million, Moodys says.
Conseco is projecting about $1 billion in cash flow for the year and total 2002 obligations of about $912 million, Moodys says.
Gary Wendt, chairman of the insurance and consumer finance company, responded by issuing a statement of his own questioning the timing of the Moodys ratings action and the language it used in its release.
“The basis cited for todays action was information that is between four and six weeks old,” Wendt says in the statement. “And, to the extent the action is based on reported first-quarter earnings, it is based on information that is now two months old.”
Wendt reports that Conseco is taking awhile to raise cash because it has negotiated a new bank agreement that gives it more time to pay its bank loans.