Conseco Seeks Extension on Repayment of Debt

nsurance firm Conseco Inc. on Monday asked bondholders for more time to repay as much as $2.54 billion of debt.

The offer would replace existing bonds with securities that have identical principal amounts and interest rates, but mature one to two-and-a-half years later.

The new securities would have priority if the company became insolvent.

Conseco proposed the exchange as it tries to sell assets and boost earnings in the face of rising defaults on mobile-home loans it owns. The company, which hired Chief Executive Gary Wendt in 2000 to turn the business around, said earlier this year it will get a qualified opinion from its auditors unless it shows it can raise $410 million from asset sales by March 31.

“If it allows Conseco some breathing room and improves its survivability, then it would be foolish for bondholders not to take this deal,” said John Devaney, who holds $50 million of Conseco debt at United Capital Markets Inc.

Conseco bonds were largely unchanged in trading Monday, signaling investors haven’t decided what the fallout would be if the restructuring doesn’t go through. The exchange offer, which expires April 12, will be made only to “qualified” institutions, the firm said.

Moody’s Investors Service said it may lower Conseco’s debt ratings, as the proposed restructuring “highlights the fragility of the company’s financial position.”

Conseco still needs to reach agreements on asset sales and negotiate with its banks to approve the exchange and release it from loan covenants that it may breach at the end of the month, analysts said.

Conseco shares, which have gyrated wildly in recent weeks as investors have speculated about the company’s future, fell 65 cents to $3.40 on the New York Stock Exchange Monday. The stock was as high as $20 last May.