- The Washington Times - Thursday, December 19, 2002

INDIANAPOLIS (AP) Insurance and finance company Conseco Inc., deep in debt and facing a federal investigation of its accounting practices, filed for Chapter 11 protection in the third-largest bankruptcy in U.S. history.
The company filed late Tuesday after reaching tentative agreements with two of the three groups of investors owed $6.5 billion from acquisitions in the 1990s that soured, including a $6 billion purchase that left Conseco with the nation's largest portfolio of mobile-home loans.
St. Paul, Minn.-based Conseco Finance Corp., which oversees that portfolio and other consumer finance products, would be sold under the agreement.
The filing does not include Conseco's insurance operations, which the company and insurance regulators say remain financially sound.
Conseco reached agreements in principle with bondholders owed $2.5 billion in public debt and banks that are due $1.5 billion. Holders of preferred securities, who maintain privileges over holders of common stock in recovering their investments, did not reach a deal and talks will continue, Conseco spokesman Mark Lubbers said.
Conseco is the third-largest company to file for bankruptcy protection in the United States. The company and its subsidiaries had $61.4 billion in assets at the end of 2001. In its filing yesterday, which excluded its profitable insurance subsidiaries, the company listed $52.3 billion in assets and $51.1 billion in debts.
WorldCom's assets at its July filing totaled $104 billion. Enron had $64 billion when it filed last December.
Before Tuesday, the third-largest bankruptcy was the 1987 filing by Texaco, which had nearly $36 billion in assets. With the filing by United Airlines' parent company last week, seven of the 12 largest bankruptcies since 1980 have been filed this year.
Conseco maintains that the use of assets to measure bankruptcies is inappropriate in its case because its insurance operations are not included in the filing. It also says that its debt entering bankruptcy is much smaller than several other companies' debts at the time they filed.
Although the bankruptcy filing was unsurprising given Conseco's recent woes, it marked a dramatic downfall for a company whose stock was once a Wall Street darling.
From 1988 to 1998, the stock averaged a total return of 47 percent per year, and Conseco shares traded as high as $58. Today, the stock trades at less than a nickel per share.
The nation's seventh-largest insurance provider, based in the Indianapolis suburb of Carmel, abandoned a gradual debt-reduction plan Aug. 9 in favor of a negotiated restructuring.
The parties initially hoped to reach a quick deal to avoid further erosion of Conseco's businesses, but the talks dragged.
Preferred investors were not included in the talks initially, but were granted a seat after they protested. Bondholders, meanwhile, submitted a proposal in the talks to take full equity ownership of Conseco. Common investors are expected to recoup little, if any, of their losses.
Details of the agreement must still be resolved and approved by investor group members before a reorganization plan can be submitted for the court's approval, Mr. Lubbers said. A filing outlining specifics of the plan could be submitted within four to six weeks.

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