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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowConseco Inc., at risk of violating its main credit agreement, has asked its senior secured lenders to waive restrictions on their $912 million in loans, the company announced today.
Conseco, a Carmel-based life insurer, indicated in a statement that it would pay a higher interest rate on the loans in exchange for its lenders relaxing or suspending financial covenants on the agreements.
Such covenants include things like Conseco’s debt-to-capital ratio, which moved perilously close to its threshold at the end of 2008.
Bank of America, which administers the loans, will also coordinate Conseco’s request for an amendment. A majority of its lenders must agree to any changes to the lending terms.
Conseco said today its request for an amendment does not include borrowing any more money or changing its repayment schedule.
In 2008, Conseco lost $1 billion due to the shedding its money-losing Senior Health policies. The losses pushed Conseco’s debt-to-total-capital ratio up to 28 percent at the end of December. The ratio was 21 percent a year earlier.
If that level hits 30 percent, Conseco would default on its senior-secured credit facility.
Because of that risk and other concerns about Conseco’s amount of cash, Conseco’s auditor PricewaterhouseCoopers has threatened to insert a “going-concern” warning in Conseco’s annual report. If that happens, Conseco also would be in default on its senior-secured credit facility.
Conseco expects its cash balance to grow from $59 million at the end of 2008 to more than $75 million by the end of 2009. But a large chunk of those expectations depend on winning approval from state insurance regulators.
Conseco has said it would file its annual report on or before March 31.
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