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CNCE news late today......
http://biz.yahoo.com/djus/020821/1753000717_1.html


Dow Jones Business News
Conseco Bondholders Hope For Quick Deal On Eve Of Mtg
Wednesday August 21, 5:53 pm ET

By Tom Barkley, Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Conseco Inc. (NYSE:CNC - News) meets for the first time Thursday in New York with an ad hoc committee of bondholders in what both sides hope will result in a quick and major restructuring of the insurer's heavy debt load.

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"Bondholders want a global solution, and they want a fast solution," said Eric Siegert, managing director of Houlihan Lokey Howard & Zukin, which the committee hired as a financial adviser. "They want to make sure that, at the end of the day, there is a very strong insurance and finance company," he added.

In announcing the formation of the committee Tuesday, Carmel, Inc.-based Conseco said it saw the organization by bondholders as a "positive development toward a prompt, successful restructuring."

Conseco announced plans to restructure its $6.5 million in debt, including about $2.6 billion in bonds, on August 9. Last week, the company warned in its second-quarter 10-Q filing with the Securities & Exchange Commission that it may have to seek bankruptcy protection if debtholders don't agree to a major restructuring.

Conseco also disclosed that it defaulted on a $1.5 billion credit facility and $700 million in guaranteed loans to current and former company officials, after violating a debt-to-capitalization ratio.

The banks gave the company a waiver on the default until Sept. 9, which is also when the grace period expires on its missed bond interest payments. Either default would cause cross defaults on all the company's debt.

Though industry observers say the rapid organization of debtholders bodes well for a quick restructuring, some sort of Chapter 11 filing is seen as likely.

"Any time you have a restructuring that is this large and complex, and with this many constituents, it's hard to see how that wouldn't have a Chapter 11 filing at some point," said Siegert. But he anticipates a prepackaged bankruptcy, in which "a Chapter 11 filing is nothing more than an implementation mechanism" and a judge signs off on a plan approved by the various creditor classes.

A portfolio manager whose fund holds Conseco bonds, but who isn't on the committee, agrees that a prepackaged filing is the most likely outcome.

"Clearly it makes sense to try to attempt a debt-for-equity swap, and I think that's what the company is trying to do. But an out-of-court deal with public securities will be tricky, since negotiations will probably run through the grace period," he said.

Unextended Circumstances

A debt swap Conseco engineered earlier in the year to push back maturities and buy itself time could come back to haunt the company in the restructuring process.

"I think the biggest hurdle will be getting the extended and the unextended noteholders to agree on how they will be treated," said Eric Tutterow, Chicago- based fixed-income analyst at KDP Investment Advisors, a high-yield advisory firm.

Since the tender offer was made via a Rule 144a private placement, and thus was only open to institutional investors, some smaller investors couldn't take part. The new notes, which now consist of about half of the amount of Conseco's outstanding bonds, are structurally senior to the old ones because they are guaranteed by the CIHC Inc., a holding company subsidiary that owns the stock of the insurance units.

"I think the guys that were unable to extend their notes will argue that they wanted to extend their notes, but couldn't, so they should get the same guarantee," said Tutterow.

Wooden Nickel Bonds?

Meanwhile, state insurance regulators are closely monitoring the restructuring effort. But with both the insurance units and other operating subsidiaries not involved in the restructuring, regulators are unlikely to be much of an impediment to an agreement, say industry observers.

Conseco said Tuesday its three operating units - Conseco Insurance Group, Conseco Finance Corp. and Bankers Life and Casualty Co. - continue to operate as usual.

Siegert of Houlihan said the committee agrees with the company's goal of keeping the operating subsidiaries out of the restructuring.

He described Thursday's meeting as "a kickoff meeting to determine a game plan and discuss important issues and next steps," declining to discuss any particular proposals bondholders will make. The committee's legal adviser is Fried, Frank, Harris, Shriver & Jacobson.

Conseco has hired Lazard Freres & Co. as financial advisers and Kirkland & Ellis as legal advisors.

Conseco shares, trading over the counter since the New York Stock Exchange moved to delist them earlier in the month, were unchanged at around 12 cents.

Conseco bonds have been on an extended decline, trading at cents on the dollar. The 8 3/4% notes due 2004 slipped a penny Wednesday to just 5 cents on the dollar.

-By Tom Barkley, Dow Jones Newswires; 201-938-4385 [e-mail]






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