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Conseco to sell shares, bonds to shore up finances

J.K. Wall
October 13, 2009
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Conseco Inc. has secured a $78 million investment from a hedge fund, and will sell additional stock and bonds, in a bid to clear up the Carmel-based insurer's financial uncertainties.

Paulson & Co., a private investment firm based in New York, will acquire 16.4 million shares, with warrants to obtain another 5 million shares. Combined with shares Paulson already owns, Paulson will control 9.9 percent of the company.

Conseco plans to sell $200 million of common stock in a secondary offering and sell $293 million in new bonds. Conseco hopes to complete the transactions by March.

The moves will allow the Conseco to pay off $293 million in bonds that Conseco might have been forced to convert into cash in September 2010.

Conseco didn't have the cash for such an event, a concern that has kept analysts and investors on the sidelines about Conseco's stock.

But after today's announcements, made after the markets closed, Conseco's shares shot up 14 percent to $5.69 apiece in after-hours trading.

Earlier this year, Conseco survived a brush with financial disaster after its public accounting firm threatened to issue a warning about Conseco's ability to stay in business. Conseco risked breaching its bank agreements because the value of its investment assets had plunged in the global financial crisis.

Conseco successfully renegotiated its lending agreements, agreeing to pay higher interest in exchange for looser restrictions.

The company's stock has surged since then, but some investors have remained concerned, citing the convertible bonds that could come due in September.

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  1. PJ - Mall operators like Simon, and most developers/ land owners, establish individual legal entities for each property to avoid having a problem location sink the ship, or simply structure the note to exclude anything but the property acting as collateral. Usually both. The big banks that lend are big boys that know the risks and aren't mad at Simon for forking over the deed and walking away.

  2. Do any of the East side residence think that Macy, JC Penny's and the other national tenants would have letft the mall if they were making money?? I have read several post about how Simon neglected the property but it sounds like the Eastsiders stopped shopping at the mall even when it was full with all of the national retailers that you want to come back to the mall. I used to work at the Dick's at Washington Square and I know for a fact it's the worst performing Dick's in the Indianapolis market. You better start shopping there before it closes also.

  3. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  4. If you only knew....

  5. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

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