Conseco $500 million mandatory talked at 5.75-6.25%, up 18-22%

By Ronda Fears

Nashville, April 15 - Conseco Inc. launched $500 million of three-year convertible mandatory units on Thursday with price talk for a 5.75% to 6.25% dividend and an 18% to 22% initial conversion premium, with pricing tentatively set for April 28.

Joint bookrunners of the mandatory offering are Goldman Sachs & Co. and Morgan Stanley. J.P. Morgan is co-manager of the mandatory offering.

The Carmel, Ind.-based insurance company is also selling $1 billion of common stock. Goldman Sachs & Co. and Morgan Stanley are joint lead managers. Banc of America Securities is co-manager of the stock offering.

Conseco filed a registration statement on the offering in late January. At that time, the company planned $350 million of mandatory convertibles and $800 million of common stock. The registration statement was amended in a filing Thursday

The mandatory is callable with a 150% threshold and has a make-whole provision for dividend payments. Par on the issue is $25.

The issue is expected to be rated B- by Standard & Poor's and Caa2 by Moody's Investors Service.

Proceeds are earmarked to take out its $859.7 million of 10.5% step-up payable-in-kind convertible preferreds, pay on its senior credit facility - which matures in 2009 and currently has a weighted average interest rate of 7.8% - contribute capital to subsidiaries and for general corporate purposes.

Conseco is striving still to restructure its capital base, as proceeds would be used to take out the convertible that was issued to pay bondholder claims in its bankruptcy case last year. The company emerged from bankruptcy in September.

The convertibles would step up to 11% on Sept. 11, 2005 and are payable in kind until Sept. 11, 2005.

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