Conseco hopes to raise $200M with stock offering

Insurer Conseco Inc. said Tuesday it plans a registered offering of common stock that will generate about $200 million in gross proceeds to the company.

Conseco is currently required to use half of the net proceeds of any such issuance to repay indebtedness under its credit agreement. The remaining net proceeds would be used for general corporate purposes.

The move is part of the company’s plan to boost capital. That plan also includes a registered stock offering that will give New York-based hedge fund manager Paulson & Co. a 9.9-percent share in the company.

Carmel-based Conseco said it has agreed to sell Paulson 16.4 million common shares and warrants to purchase 5 million shares for $77.9 million.

Half of the net proceeds from the issuance of these shares will be used to repay indebtedness under Conseco’s credit agreement. Additional proceeds will be used to purchase existing convertible debentures and for general corporate purposes.

The company also plans to privately offer up to $293 million aggregate principal amount of 7-percent convertible senior debentures due 2016.

The new convertible debentures will be offered for resale only to qualified institutional buyers.

On June 30, 2013, the debentures will be convertible into common stock at the option of the holder at any time, subject to certain exceptions.

Conseco expects the closing of the private offering before Oct. 5, 2010, the date on which the company may redeem any existing convertible debentures that remain outstanding.

Net proceeds will be used to purchase existing convertible debentures.

The warrants that Paulson will receive will have an exercise price of $6.50 per share of common stock, subject to customary anti-dilution adjustments.

The issuance of shares and convertible debentures will exceed a New York Stock Exchange rule that says a company must seek stockholder approval before issuing more than 20 percent of outstanding shares. The rule offers an exception in cases where the delay involved in securing stockholder approval for the issuance would seriously jeopardize the financial viability of the listed company.

The NYSE has approved Conseco’s reliance on the exception, the company said.

Conseco shares rose 73 cents, or 15 percent, to $5.62 in after-hours trading following the announcement of the offering. Earlier, the stock fell 13 cents, or 2.5 percent, to close at $4.99 in the regular session.