S&P Announces: Conseco Inc., Units Ratings Placed On Watch Positive.Business Editors NEW YORK--(BUSINESS WIRE)--April 19, 2004 On April 19, 2004, Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. placed its 'B-' counterparty credit, 'B-' senior debt, and 'CCC-' preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. ratings on Conseco Inc. on CreditWatch with positive implications. At the same time, Standard & Poor's placed its 'BB-' counterparty credit ratings and financial strength ratings on Bankers Life & Casualty Co., Colonial Penn Colonial Penn Life Insurance Company is a Philadelphia, Pennsylvania based life insurance company. Colonial Penn's marketing campaign is aimed at senior citizens between the age of 50 and 85. They claim to offer insurance at a comparatively low rate without medical reviews. Life Insurance Co., Conseco Insurance Co. (f.k.a, Conseco Annuity Assurance Co.), Conseco Health Insurance Co., Conseco Life Insurance Co., and Conseco Life Insurance Co. of NY on CreditWatch with positive implications. The CreditWatch reflects the expected issuance by Conseco Inc. of $1 billion of new common equity by early May 2004. Not affected by this CreditWatch action are the ratings on Conseco Senior Health Insurance Co., which remain on CreditWatch negative where they were placed Nov. 19, 2003. Proceeds from the common equity issuance In financial markets, an Equity Issuance is the sale of new equity or "stocks" by a firm to investors. Equity Issuance can involve a private sale, in which the transaction between investors and the firm takes place directly, or publicly, in which case the firm has to , in conjunction with proceeds from an expected $500 million issuance of mandatory convertible Mandatory Convertible A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. preferred stock and $900 million of new bank debt, are expected to be used to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. the existing $1.3 billion of outstanding bank debt, redeem the outstanding $900 million of convertible exchangeable preferred stock Convertible exchangeable preferred stock Convertible preferred stock that may be exchanged, at the issuer's option, into convertible bonds that have the same conversion features as the convertible preferred stock. , and make a capital contribution to the insurance subsidiaries. Because of this recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. , Conseco Inc. is expected to have a capital structure with less onerous debt service payments than currently exists, allowing for greater fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making that should be supportive of higher ratings at the holding company as well as at the insurance subsidiaries. If the ratings are upgraded, it is expected that the senior debt rating on Conseco Inc. will go no higher than 'BB-', the preferred stock rating will go no higher than 'B-', and the financial strength will go no higher than 'BB+'. Assuming a successful recapitalization of the holding company, the ratings constraint for Conseco will shift from being the holding company's capital structure to being the insurance operations. At this time, Standard & Poor's believes it is too early to consider Conseco's insurance operations to be investment grade largely due to the uncertainty regarding the company's future competitive position. Although financial results have been generally positive since Conseco Inc.'s emergence from bankruptcy in September 2003, Standard & Poor's believes it will take an additional two to four quarters of actual results to determine how effective management has been at reattracting the independent agent force to sell Conseco products, and if the products are priced appropriately to deliver sufficient statutory earnings to generate the capital needed to fund additional growth.
Ratings List
To From
Conseco Inc.
Counterparty credit rating B-/WatchPos/-- B-/Stable
Senior debt B-/WatchPos B-
Preferred stock CCC-/WatchPos CCC-
Bankers Life & Casualty Co.
Colonial Penn Life Insurance Co.
Conseco Insurance Co. (f.k.a.,
Conseco Annuity Assurance Co.)
Conseco Health Insurance Co.
Conseco Life Insurance Co.
Conseco Life Insurance Co. of NY
Counterparty credit rating BB-/WatchPos/-- BB-/Stable
Financial strength rating BB-/WatchPos BB-/Stable
-0-
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Find Ratings, then Credit Ratings Search. |
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