Fitch: Conseco Remains on Ratings Watch

Fitch rating agency has issued comments on Conseco, Inc. and its related entities, saying the company will remain on watch until its bank obligations are settled.

On Sept. 22, Conseco announced an agreement with its bank group that resolved the $1.4 billion of bank obligations that came due that day. The agreement is part of a broad restoration plan designed to re-engineer Conseco’s financial structure.

According to Fitch, this agreement removes a major uncertainty related to the company. It also allows the company the ability to conduct asset sales in a more orderly fashion. With the favorable resolution of the bank maturity issue, Fitch is in the process of conducting a full analysis and evaluation of management’s strategic initiatives, financial plans and timetable to determine if

Fitch’s current Conseco-related ratings and Rating Watch status should be retained or adjusted. Fitch’s current ratings will remain in place until this process is completed. Under the terms of the agreement, Conseco will pay $650 million in bank debt on Sept. 22, 2000, and will extend $571 million of bank debt to Dec. 31, 2001, to be funded by the sale of nonstrategic assets.

Previously due September 2003, $1.5 billion of bank debt will be paid in payments of $150 million in each of 2002 and 2003, with an option to extend the remaining $1.2 billion to 2005. Scheduled public debt payments will be made in December 2000 ($131 million), June 2001 ($668 million), October 2002 ($450 million) and February 2003 ($310 million). In addition, Conseco has extended $570 million of loans and related Conseco guarantees comprising the Conseco directors and officers stock purchase program to December 2003.

To qualify for the loan and guarantee extensions, borrowers will be required to enter into a revised lending program, which will be finalized in the fourth quarter of 2000. When the review is completed, the ratings for Conseco Finance will be assessed on a stand-alone basis, based on information contained in the loan documents. The impact of this delinking on the holding company and insurance company ratings, if any, will be assessed as part of the review.