Chase Manhattan Corp. and First Union Corp. joined forces and unexpectedly won the mandate to lead a $1.1 billion loan for Conseco Inc., bank officials said.
Conseco, the $10.8 billion-asset insurance powerhouse based in Carmel, Ind., will use an estimated $728 million to purchase the remaining outstanding shares of two affiliate companies, Bankers Life Holding and CCP Insurance. The rest of the loan will refinance outstanding debt and provide working capital.
Market sources said there were two other banks involved in the bidding.
The winning banks attributed their success to a combination of First Union's established relationship with Conseco, Chase's expertise in insurance lending, and an unusually smooth relationship between the banks.
A participant in every one of Conseco's loans since 1990, First Union was invited to enter the bidding. Last Friday, First Union called Chase Manhattan to support its bid, said David W. Nelson, a managing director in charge of insurance lending at Chase.
The two banks scrambled to put the deal together over the weekend, and were rewarded Tuesday morning. "Our ability to react quickly made the difference," said Mr. Nelson.
Collaboration between Charlotte, N.C.-based First Union and Chase was eased by a long-standing business relationship between the principals.
Catherine E. Dolan, the managing director at First Union's insurance finance group previously worked under Mr. Nelson's direction at Chase.
Neither bank seemed poised to win the mandate alone. Despite being a leading lender in the insurance industry, Chase had not been a managing agent on Conseco's most recent $1.4 billion loan.
First Union has been building up its capital markets division but had never taken the lead in a syndicated loan larger than its $800 million financing for Penske Truck Leasing Corp. in December 1993, according to Loan Pricing Corp.
The new financing is the first big loan to Conseco since the failure of the insurance firm's $2.4 billion proposed acquisition of Kemper Corp.
Despite its lead role on the financing for the failed Kemper bid, Citicorp was not a part of Conseco's latest loan. A Conseco spokesman, however, said that bank financing was not a factor in the failure of the Kemper bid.
First Union and Chase had not said when the loan would be syndicated, but were touting the deal on Thursday. "The deal flow in the insurance market for leveraged financings has been pretty slow," said Mr. Nelson. "This is the first big leveraged financing for the year."
This deal made a lot of sense for the company and will have attractive pricing and structure for banks, said Ms. Dolan.
First Union is the administrative agent and Chase the syndication agent.
Market sources say that the banks have equally underwritten the entire loan.
Although the company has not finalized its strategy and the banks have not put together a meeting, bankers estimate that 15 to 25 banks will be asked to join the syndicate.
"There'll be more than enough appetite within the insurance banking sector," said Mr. Nelson, though he didn't rule out the possibility of asking some noninsurance banks to join the syndicate.