Conseco Inc. Thursday said short-sellers are spreading misleading information about its debt situation.
The company would not say what the misinformation was. But in a statement the Carmel, Ind., company told investors to consult sections of its latest 10-Q filing with the Securities and Exchange Commission.
Those sections say the company is optimistic that it will be able to extend the maturities on $1.4 billion of debt that is scheduled to come due Sept. 30, and sell or restructure its troubled lending unit, Conseco Finance Corp., formerly Green Tree Financial Corp.
A spokesman said the rumors were being spread mostly by word of mouth.
Conseco acknowledges in its 10-Q that "because of the time required to complete the sale of assets and other contemplated activities, extension of the company's bank credit facilities will be required if the company is to meet its September debt maturities."
The filing also says that the company remains optimistic that extensions can be negotiated, but offers no assurances that it will be successful.
Included in the $1.4 billion is $570.2 million in bank loans to approximately 170 directors, officers, and employees. Employees used the loans, which Conseco originally guaranteed, to purchase shares of the company. Of the $570.2 million, $144.4 million will mature on Sept. 1 and $425.8 million will come due on Aug. 30, 2001.
The problem is that as of June 30 the bank loans exceeded the value of the stock collateralizing the loans by $385.3 million. The company said that the borrowers have agreed to indemnify the company for any losses incurred.
The large collateral-to-loan gap stems from the beating that Conseco's stock has taken since the Green Tree purchase in 1998. It hit a two-year low of $4.625 in May after trading as high as $41.50 in August 1998. Shares traded at $7.50 late Thursday, up 3.45%, or 25 cents, from Wednesday's close.
Two years ago Conseco bought Green Tree Financial, a manufactured housing lender based in St. Paul, for $6.5 billion and renamed it Conseco Finance. But after several writedowns related to gain-on-sale accounting methods, including a $350 million hit in March that forced it to restate last year's earnings, Conseco decided to cut its losses and put the lender on the block.
Founder and chairman Stephen C. Hilbert resigned in April because of the troubles related to the Green Tree deal and a plummeting stock price. In late June Gary C. Wendt, the former chairman and CEO of GE Capital Services, was brought in to turn Conseco around.
In March, Mr. Hilbert said he thought Conseco Finance would fetch $4.5 billion. But the 10-Q shows that the company has lowered its expectations. "Conseco believes that the sale of nonstrategic assets and the actions contemplated at Conseco Finance will generate cash proceeds of approximately $2 billion over the next 12 to 15 months," the filing said.
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