Conseco amends bank loan to relax covenants; spread upped 75 basis points

By Sara Rosenberg

New York, March 22 - Conseco Inc. said it reached agreement with its bank lenders on amendments to the company's credit facility, which relaxed financial covenants but increased interest rates by 75 basis points.

In the newly amended facility, the liquidity requirement was reduced to $50 million from $100 million.

Previously, proceeds from asset sales were split 50/50 between the company and the banks. Under the modified facility, more flexibility is granted to the company to meet its cash obligations. The first $352 million of proceeds from sales is to be retained by Conseco, while the next $313 million is to be used for prepayments to the banks. The next $250 million to $915 million is to be split 50/50. Anything greater than $915 million or anything from Dec. 31, 2003 through March 31, 2004 is to be split 75% to the banks and 25% to the company.

The interest rate on the loan was raised to Libor plus 325 basis points from Libor plus 250 basis points.

In order to receive an extension till March 31, 2005 on the credit facility's maturity date, Conseco must make optional prepayments in Sept. 2002 of $200 million and in Sept. 2003 of $300 million.

According to a memo from Conseco chairman and chief executive officer Gary Wendt, the company is "planning to optionally prepay $200 million of bank debt in 2002. Most of the $200 million additional prepayment in 2003 was projected to occur anyway under our plan and the terms of the 50/50 waterfall provisions of the former bank agreement."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.