S&P: Conseco on positive watch

Standard & Poor's said it placed its B- counterparty credit, B- senior debt, and CCC- preferred stock ratings on Conseco Inc. on CreditWatch with positive implications.

At the same time, S&P placed its BB- counterparty credit ratings and financial strength ratings on 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., 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," said S&P credit analyst Jon Reichert. 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 conjunction with proceeds from an expected $500 million issuance of mandatory convertible preferred stock and $900 million of new bank debt, are expected to be used to refinance the existing $1.3 billion of outstanding bank debt, redeem the outstanding $900 million of convertible exchangeable preferred stock, and make a capital contribution to the insurance subsidiaries," Reichert added.

"Because of this recapitalization, Conseco Inc. is expected to have a capital structure with less onerous debt service payments than currently exists, allowing for greater fixed-charge coverage 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+, the agency concluded.

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