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Mix-Ansicht- Hatte ich mal was zu Conseco gesagt? - XERXES, 19.03.2002, 13:47
- Re: Hatte ich mal was zu Conseco gesagt? - Emerald, 19.03.2002, 14:05
Hatte ich mal was zu Conseco gesagt?
MARKET PLACE
Conseco Seeks to Delay Bond Repayments
By FLOYD NORRIS and PATRICK McGEEHAN
ometimes a borrower with bad credit is in a good position to negotiate with its creditors. So it may be with Conseco (news/quote), the insurance and finance company that is struggling to stay afloat while it tries to sell assets and put its house in order.
Yesterday, Conseco offered some bondholders a difficult choice. They were asked to delay the scheduled repayments of their bonds, with a total face value of $2.54 billion, by up to two and a half years.
Those who agree will be doing Conseco a big favor. At the moment, the company could probably not borrow money in the bond market at any rate. So if Conseco could persuade bondholders to extend their bonds at existing rates, which range from 6.4 percent to 10.75 percent, it would borrow money at rates it could otherwise only dream of.
The carrot for those who agree to extend their maturities is that the new bonds they receive will rank ahead of the old bonds in terms of recovering money if Conseco filed for bankruptcy protection.
"That could be pretty significant," said Patrick Finnegan, a senior vice president of Moody's Investors Service. He said that Moody's (news/quote) expected to reduce the rating of the existing bonds to B3, a low junk bond rating, from B2, while the new bonds would be rated B2.
On the other hand, those who do not tender their bonds will be repaid more rapidly, assuming that Conseco is able to make the payments. Mr. Finnegan said he expected that relatively few of the bonds that mature in 2002 and 2003 would be tendered. Instead, he said, more of the bonds maturing in later years would probably be exchanged.
The markets did not have a positive view of the exchange offer. Shares of Conseco shares fell 65 cents, to $3.40, and Conseco bonds generally fell slightly in price. The bonds had slipped last week on speculation that an offer was likely.
Conseco's bonds with a rate of 8.5 percent that mature in October were quoted at 84 bid and 85 offered, meaning that an investor could buy a $1,000 bond that reaches maturity in seven months for $850.
Yesterday's exchange offer was made only to qualified institutional owners, which generally excludes individual investors, although some wealthy individuals could qualify. That apparently was done to allow the exchange to take place quickly, with bond owners having to tender by April 12. The delays would be longer if the new bonds had to be registered with the Securities and Exchange Commission, a necessary move if they were offered to all holders. Mark Lubbers, a Conseco spokesman, said that less than 10 percent of the bonds were in the hands of individual investors who might not be able to tender.
Two decisions that could affect Conseco's ability to operate are expected by the end of March. The first is from A. M. Best, which is considering whether to reduce Conseco's A- minus insurance rating. A cut would make it harder to sell certain insurance products.
The second is from PricewaterhouseCoopers, Conseco's auditor, which has not said whether it will give an unqualified audit opinion or warn that Conseco's ability to continue as a going concern is in doubt. That decision may hinge in part on Conseco's progress in renegotiating its bank debt and on expectations for the success of the tender offers announced yesterday.
One unanswered question is whether Gary Wendt, the chairman and chief executive of Conseco, will tender his $10 million of bonds, which have a rate of 10.75 percent and mature in June 2008. Those bonds are to be extended by one year. Mr. Lubbers declined to comment on Mr. Wendt's plans.
Wall Street research often seems to work on the same grading system used in Garrison Keillor's mythical town of Lake Wobegone,"where all the children are above average."
Morgan Stanley Dean Witter (news/quote) made an effort yesterday to do something about that, introducing a rating system in which analysts were supposed to rate stocks against companies in the same industry, with ratings of overweight, equal-weight and underweight.
A stock rated overweight is expected to produce a return that is higher than the average for all stocks in the industry over the next 12 to 18 months. An equal-weight stock would match the average; an underweight stock would trail it.
Dennis Shea, Morgan Stanley's director for global equity research, said that of the 895 North American companies rated, 33 percent were given overweight ratings, 45 percent were equal-weight and 22 percent were underweight.
Under Morgan Stanley's old system, analysts were supposed to rate stocks against the Standard & Poor's 500-stock index. Under that system, few stocks were rated below average. Fewer than 1 percent received the lowest rating, underperform, in the old system, while 13 percent were rated strong buy, 41 percent outperform and 46 percent neutral.
In fact, many on Wall Street have long understood that neutral was really a negative rating, or to use the words of some firms,"hold means sell."
"We wanted a system where the words meant what they said," Mr. Shea said."There is no stigma attached to being an underweight."
There is still a bullish bias in one regard. The analysts were also asked to say whether the industry they followed would do better than the market as a whole. In North America, 40 percent of industries were expected to outperform, 46 percent were expected to match the market and 14 percent were expected to lag.
Among Morgan Stanley analysts following at least five companies, the one who appeared to be most enthusiastic, based on the percentage of overweight grades issued, was Mary Meeker, the firm's Internet analyst. Of the 12 companies she covered, 8, or 67 percent, were expected to beat the industry average and only one, Ask Jeeves (news/quote), was expected to lag.
The analyst who was most negative was Todd Scott, who followed the"competitive communications services industry," which is what Morgan Stanley calls the companies that set out to compete with local phone companies. He ranked four of the seven underweight, and none overweight. The ratings recognize that his industry is, to say the least, doing poorly. The three that he thought would do the best have share prices ranging from $2.68 to $9.69. The four laggards trade for $1.23 or less a share.
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