NU Online News Service, Oct. 9, 8:07 p.m. – A group of bondholders is talking to Conseco Inc., Carmel, Ind., about debt capacity, enterprise value and the need to deleverage, according to Brad Eric Scheler, a lawyer in the New York office of Fried, Frank, Harris, Shriver & Jacobson, who helps represent the bondholders.
“So far, it looks pretty good,” Scheler says. “What is clear is that [Conseco needs] to deleverage.”
Scheler says “it is definitely possible” that the bondholders could still reach an agreement with Conseco.
Because Conseco’s debt exceeds the company’s value, an agreement would, in effect, give the bondholders control over the company, Scheler says.
Conseco’s debt stood at $4.6 billion June 30, according to a filing with the U.S. Securities and Exchange Commission.
Quantifying how much cash is available to pay the debt will entail examining individual Conseco business units, and determining the company’s future credit rating will also be important, Scheler says.
The current discussions are focusing on $1.5 billion in straight bank loan debt and $500 million in loans made to officers and directors, Scheler says.
Conseco says it is in default on financial covenants in certain credit agreements. The company is negotiating with its lenders to extend temporary waivers of the covenants that are set to expire Oct. 17.
Mark Lubbers, a Conseco spokesman, declined to comment on the financial restructuring discussions, the reports about bondholder demands, or the announcement made earlier this week that Gary Wendt would step down as the company’s chief executive but continue to be the chairman.
Scheler says he was not part of the conversation regarding Wendt’s announcement and cannot comment on that point.