Conseco, Green Tree Fincl Rtgs Afmd by S&P Re: Merger.NEW YORK--(BUSINESS WIRE)--April 9, 1998-- Standard & Poor's affirms the ratings of Conseco Inc. and Green Tree Financial Corp., in light of the announced merger of the two companies (see ratings list below). Standard & Poor's believes Conseco's overall capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. will continue to support its current ratings, despite Green Tree's weak capitalization that will inevitably lead to capital infusions Capital infusion Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. from Conseco. Although management views the primary economic benefit of the merger to be revenue growth rather than expense reduction, it remains to be seen how successful the planned cross-selling efforts will be. The extent to which expenses are reduced will primarily be through Conseco's ability to provide a lower cost of funding for Green Tree. Green Tree is the country's leading provider of manufactured housing Manufactured housing (also known as prefab housing) is a type of housing unit that is largely assembled in factories and then transported to sites of use. In the United States, the term "manufactured home" specifically refers to a house built entirely in a protected financing as well as a top provider of home equity and home improvement loans. The company has a strong franchise and extensive experience at originating, underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , securitizing, and servicing consumer finance products of various types. Earnings and capital quality are low, as is the norm with all companies that employ gain-on-sale accounting. Over the past year, the company has had two gain-related adjustments totaling $390 million. Including Green Tree, Conseco's pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma year-end 1998 debt to capital ratio is expected to be 26%, preferred to capital will be 17%, double leverage will be 120%, and fixed charge coverage is expected to be over 4 times, all of which support the current ratings. Standard & Poor's believes management remains committed to keeping debt to capital at or below 35%. While the merger with Green Tree is a departure from Conseco's traditional insurance business, it is not a surprising strategic move, given management's belief in the inevitable convergence of the various financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. sectors. This transaction further extends the company's product line-up, which has been occurring over the past two years as Conseco has begun offering supplemental health, long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. , and cancer insurance, in addition to its retirement annuities and life insurance products. With Green Tree, Conseco's earnings are anticipated to be derived from consumer finance (31%), supplemental health (24%), life insurance (21%), and annuities (17%). OUTLOOK: STABLE Standard & Poor's anticipates Conseco will continue to generate strong profitability, capitalization at the holding company and its operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon will remain supportive of the current ratings, and management will continue to be opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. in evaluating potential acquisition/merger candidates. Green Tree's stable outlook continues to reflect the risks accompanying its rapid diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. strategy as well as its reliance on gain-on-sale accounting, which are mitigated by the company's dominant market position in the manufactured housing sector, Standard & Poor's said. -- CreditWire
OUTSTANDING RATINGS AFFIRMED
Rating
Conseco Inc.
Corporate credit rating BBB
Senior debt BBB
Preferred stock BBB-
Commercial paper A-2
Green Tree Financial Corp.
Corporate credit rating BBB-
Senior debt BBB-
Subordinated debt BB+
Commercial paper A-3
CONTACT: Conseco Jon Reichert, 212-208-1775 Timothy W. Clark, 212-208-1593 or Green Tree David M. Graifman, 212-208-1596 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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