NU Online News Service, Aug. 9, 4:45 p.m. – Conseco Inc. has decided to use grace periods that give it the right to put off interest payments on five bond issues for 30 days.
The Carmel, Ind., financial-services company says it has also hired an investment bank, Lazard Freres & Company L.L.C., New York, and a law firm, Kirkland & Ellis, to help it begin “immediate discussions with our debt holders with a goal of restructuring the capital of the parent company.”
The Indianapolis Star reports that it has obtained Conseco memos suggesting that a bankruptcy filing could be one of the strategies under consideration.
Representatives for Conseco were not immediately available to comment on the Star report.
Conseco expanded its life insurance and consumer finance operations rapidly in the mid-1990s through a series of big acquisitions, but it later ran into trouble as a result of defaults on consumer loans and other problems with the non-insurance units.
The company brought in Gary Wendt, a hard-charging GE Capital veteran, in June 2000 to turn the company around.
Up till now, Wendt has been emphasizing the importance of maximizing shareholder returns by taking a slow, steady approach, rather than wasting assets by rushing to raise cash and refinance debt at any cost.
But Wendt said today that he and other Conseco executives now believe the company must make a “radical change in the company’s capital structure” rather than simply continuing with a gradual financial restructuring.
“We cannot emphasize strongly enough our continued belief that the insurance and finance businesses that comprise Conseco are profitable businesses that serve important markets,” Wendt said in a statement about the company’s latest moves. “The businesses of Conseco are good businesses that can have bright futures. The problem with Conseco has been the over-leveraged capital structure of the parent.”