(CNO) Conseco Offers Common Stock to Pay Down Debt

December 16th, 2009

Conseco Inc. (CNO) said on Monday that it has commenced an offering of 45 million shares of common stock primarily to help pay down debt.

The company plans to grant the underwriters a 30-day option to buy up to an additional 4.5 million shares.

Conseco intends to use $150 million plus 50% of the net proceeds of more than $200 million to repay debt under its senior credit agreement. The balance will be used for general corporate purposes.

Morgan Stanley & Co. Inc., a division of Morgan Stanley (MS), is acting as book-running manager. Credit Suisse Securities (USA) LLC, a division of Credit Suisse Group (CS), FBR Capital Markets (FBCM) and Macquarie Capital (USA) Inc. are acting as co-managers.

We remain concerned with the continued weakness in Conseco’s net results for the past few quarters and anticipate additional losses in its investment portfolio as pressures on the capital market are expected to persist for a while. However, along with cost-cutting measures, management is focused on maintaining a strong capital position. We think that all the negatives have already been factored into the price.

Though collected premium has continued to show accelerated growth, especially at Bankers Life and Colonial Penn segments, results for the Insurance Group have experienced a slight deterioration in the last few quarters. We are concerned about the pricing challenges in Conseco’s long-term care business and recent rating downgrades. However, we expect increasing new business volume to support the bottom line to some extent. Thus, we maintain our Neutral recommendation on the shares of Conseco.

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(CNO) Conseco Offers Common Stock to Pay Down Debt

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(CNO) Conseco Offers Common Stock to Pay Down Debt

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