Conseco to sell $350 million mandatory, $800 million stock to take out old convertible

By Ronda Fears

Nashville, Jan. 29 - Late in the day, Conseco Inc. filed a registration statement at the Securities and Exchange Commission to sell $350 million of mandatory convertibles and $800 million of common stock, with proceeds partly to take out its $859.7 million of 10.5% step-up payable-in-kind convertible preferreds.

There were no details like indicative terms on the Conseco deal, however, as it will have to go through the SEC approval process.

Joint bookrunners of the mandatory offering are Goldman Sachs & Co. and Morgan Stanley with JPMorgan also in the syndicate. Joint bookrunners of the stock offering are Goldman Sachs & Co. and Morgan Stanley with Banc of America Securities also in the syndicate.

Conseco said it was an effort to restructure its capital base, as proceeds would be used to take out the convertible that was issued to pay bondholder claims in the bankruptcy case when it emerged about six months ago.

"We intend to reduce our overall senior indebtedness, reduce our borrowing costs and improve the terms and conditions of our existing bank credit facility," the company said in the filing.

"We believe that we can achieve these goals by using a portion of the proceeds of the offerings of our common stock and our Class B preferred stock to retire a portion of our existing debt, or by renegotiating the terms of our existing bank credit facility."

Specifically, proceeds were earmarked to redeem the existing convertible preferred, repay debt under its senior credit facility, which matures in 2009 and currently has a weighted average interest rate of 7.8%, contribute capital to the company's insurance subsidiaries and for general corporate purposes.

The existing Conseco convertible preferreds would step up to 11% on Sept. 11, 2005 and are payable in kind until Sept. 11, 2005.

There had been keen interest in the Conseco convertible preferred, despite the lack of call protection, until the strike price was set in mid-January at $20.35. It is callable at par.

Conseco shares closed Thursday off 18 cents, or 0.78%, to $22.76.

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