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"It is definitely possible" that an agreement will be reached between Conseco Inc., and some of its bondholders, says a lawyer representing the bondholders.
The discussions between the parties are focusing on debt capacity and enterprise value and the need to deleverage, according to Brad Eric Scheler, a lawyer with the New York law firm of Fried, Frank, Harris, Shriver & Jacobson.
"So far, it looks pretty good," he says. "What is clear is that they need to deleverage."
Since the companys debt exceeds the companys value, bondholders would in effect have control of the company, Scheler explains.
Consecos debt stands at $4.6 billion at June 30, according to a filing with the Securities and Exchange Commission.
Determining how much cash is available to pay debt will entail examining individual Conseco business units, Scheler says. The companys A.M. Best ratings going forward will also be important, he adds.
Discussions are focusing on $2 billion in debt, including $1.5 billion in straight bank loans and $500 million in directors and officers loans, says Scheler.
An extension of a temporary waiver granted by Consecos senior lenders expires on Oct. 17, and Conseco is negotiating to extend it. The debt came due on Aug. 9, and the company invoked a 30-day grace period. On Sept. 9, a waiver through Oct. 17 was granted.
Mark Lubbers, a Conseco spokesman, declined to comment on financial restructuring discussions. He also would not comment on reports saying bondholders demanded that Gary Wendt step down as the companys CEO, which he did earlier this month. He will remain the companys chairman.
Scheler says he was not part of the conversation regarding Wendts announcement and could not comment on that point.
Even as the future of the parent is being worked out, insurance regulators say Consecos insurance units continue to meet solvency requirements.
