, facing default if it fails to honor over $1 billion of loans that fall due Friday, has managed to extend these credits as far out as 2005, an analyst wrote Friday.
If true, the development would be quite a break for the cash-deprived company and its new chief exec, Gary Wendt, who
joined in June to help rebuild confidence in the battered insurance and lending firm. Previous
chatter had Conseco's main bankers,
Bank of America
( CMB), extending only a part of the firm's debts out to the middle of next year, just before the company has to pay back a large amount of bond debt.
Conseco shares slipped 25 cents Friday to $8.50.
Conseco, Chase and Bank of America didn't immediately comment on the report from
, an insurance analyst at
Salomon Smith Barney
. Conseco did say that a release on the restructuring will be released after the close of markets Friday. Because some $1.07 billion of debt is scheduled to mature Friday, it's possible that Conseco will issue a release later today or early next week detailing any debt deal. It also appears that Conseco is including another $300 million of debt in the restructuring, increasing the total amount to $1.4 billion.
Devine, a long-time bear on Conseco who has raised questions about the firm's operational strength and accounting, wrote in the note that he anticipates that Conseco "will announce that it has successfully extended through 2003, with option to 2005, $1.4 billion of bank debt maturing by month's end, thereby avoiding potential Chapter 11
bankruptcy filing." He gives no other details in his note and doesn't mention a source for his information. The analyst doesn't say whether the banks are extending the whole $1.4 billion.
While a deal of this nature would certainly give Conseco a welcome breather, it also suggests that the company is struggling hard to generate cash. In essence, an extension of this length implies that Conseco is only able to raise $1.4 billion for debt repayment over three to five years. As for the banks, their willingness to go easy on a firm with such a troubled history will heighten fears that they are keeping bad loans off their books by extending loans that would otherwise get defaulted on.