Conseco bottoms out

Indianapolis -- Conseco Inc. filed a reorganization plan that detailed the company's hopes to emerge from Chapter 11 bankruptcy and stick to its traditional insurance business while selling its money-losing consumer finance operations.\nBanks and bondholders are first in line to recover their investments in Conseco, which became the third-largest U.S. company to file bankruptcy when it sought Chapter 11 protection Dec. 17. Common shareholders are last in line, and expected to recover little, if any, of their investments.\nThe reorganization plan will be reviewed by Judge Carol A. Doyle, with a hearing on the plan scheduled March 5. Later, creditor groups will vote on whether to accept the plan, Conseco said in a news release accompanying Friday night's filing.\nThe plan was filed shortly before a company-imposed midnight deadline in U.S. Bankruptcy Court in Chicago. It expanded on a tentative pre-bankruptcy agreement the company reached with banks and bondholders following talks begun in August to restructure $6.5 billion in debt, the legacy of soured 1990s acquisitions.\nConseco's news release said the company "will be engaged exclusively in the insurance business" after its emergence from bankruptcy, which it expects this spring.\n"We have worked very hard with certain key creditor constituencies to develop a plan that will provide the reorganized Conseco with a capital structure that can be supported by cash flows from ongoing operations," said William J. Shea, Conseco's president and chief executive officer.\nConseco's $6 billion purchase in 1998 of its St. Paul, Minn.-based finance unit, Conseco Finance Corp., ultimately proved to be its undoing. The unit, previously known as Green Tree Financial Corp., became a drain on the parent company as more mobile home loan customers defaulted, leaving Conseco with a glut of repossessed homes.\nConseco Finance is scheduled to be sold at a Feb. 28 auction, with Judge Doyle considering final approval of that deal March 5.\nAnalysts have said bondholders likely will have the biggest say in Conseco's near-term future, and could gain control by swapping their debt for equity ownership. Banks could gain warrants that would give them a controlling interest if Conseco's new management fails to achieve debt-reduction targets.\nAnother investor group -- holders of trust-preferred securities, who rank below banks and bondholders -- failed to reach agreement with Conseco on its future. But they won formal representation in Conseco's case in U.S. Bankruptcy Court.\nLawyers representing preferred investors, who hold $2 billion in debt compared with the $2.5 billion held by bondholders and $1.5 billion held by banks, expect to continue negotiations with Conseco.\nConseco, based in the Indianapolis suburb of Carmel, has said it hopes to cut its $6.5 billion in debt to $1.4 billion through reorganization.\nConseco's bankruptcy filing, which excluded its profitable insurance subsidiaries, listed $52.3 billion in assets and $51.2 billion in debts.\nConseco's losses for the first three quarters of last year totaled about $6 billion, and it has yet to file fourth-quarter earnings.\nThe company employed about 14,000 people at the end of 2001 -- the most recent date the company has released an employment number -- but has laid off workers since then. It had $8.1 billion in revenues that year.