2nd UPDATE: Paulson & Co. To Invest $77.9 Million In Conseco
October 13 2009 - 6:06PM
Dow Jones News
Hedge fund manager Paulson & Co. will make another big bet
on a financial company by investing $77.9 million in stock and
warrants of struggling insurer Conseco Inc. (CNO).
Conseco, which sells health, life and other insurance products,
primarily to lower- and middle-income clients, said it would use
the investment to shore up its beleaguered balance sheet.
Conseco's shares soared 16% to $5.79 in after-hours trading
after it unveiled Paulson's planned investment.
Conseco's insurance holding company said it would register with
the Securities and Exchange Commission to sell at least $200
million in shares in a public offering in addition to the Paulson
deal. Paulson's warrants will have an exercise price of $6.50.
Paulson will own 9.9% of Conseco after the completion of the
private sale of public stock, including shares previously acquired
in open-market transactions.
Paulson is famous for betting against subprime mortgages and
financials in 2007 and some of 2008, making him one of the richest
and most successful hedge fund managers in the world.
However, Paulson this year turned bullish on at least some
financials, buying several, including shares of Bank of America
Corp. (BAC) and Regions Financial Corp. (RF) during the second
quarter. The move was seen by many as a bullish turn on the sector,
and news of the purchases sparked a rally in the shares.
Conseco, in its deal, moved quickly to issue the securities,
even winning a New York Stock Exchange exception, as delaying the
offerings to get stockholder approval would "seriously jeopardize
the financial viability" of the company, the company's press
release Tuesday said.
Additionally, Conseco said it plans to sell, in a private offer,
up to $293 million in aggregate principal 7% convertible senior
debentures due 2016. The new debentures mostly won't be convertible
prior to June 30, 2013.
The deals will allow Conseco to retire $293 million in debt that
comes due in September 2010 and will build overall capital and
liquidity for the beleaguered middle-market insurer.
"We believe Conseco has a sound business model and with this
financing, a much improved financial position," said John Paulson
of Paulson & Co. "We have great confidence in Conseco's future
direction, in [CEO] Jim Prieur, his management team and the board
of directors."
Last quarter, the Indiana-based company swung to a profit as its
investment losses shrank from a year earlier, having emerged from a
tumultuous period in which it amended a credit pact after its
auditor expressed doubts it could continue as a going concern.
A Conseco spokesman declined to comment on the
announcements.
- By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141;
lavonne.kuykendall@dowjones.com
(Joseph Checkler, Kathy Shwiff and John Kell contributed to this
article.)