-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IpYtYCbYA9aSnWTETWMiwVMbY54iPCB2sgxpTHFGP6HauIFP9enKiW0qQAb69i/F ROp84ZYLogIM36kWvJ0bMQ== 0001224608-06-000034.txt : 20060919 0001224608-06-000034.hdr.sgml : 20060919 20060919092721 ACCESSION NUMBER: 0001224608-06-000034 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060919 ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060919 DATE AS OF CHANGE: 20060919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSECO INC CENTRAL INDEX KEY: 0001224608 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 753108137 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31792 FILM NUMBER: 061096992 BUSINESS ADDRESS: STREET 1: 11825 N PENNSYLVANIA ST CITY: CARMEL STATE: IN ZIP: 46032 BUSINESS PHONE: 3178176100 MAIL ADDRESS: STREET 1: 11825 NORTH PENNSYLVANIA STREET CITY: CARMEL STATE: IN ZIP: 46032 8-K 1 cnc.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 ----------- Date of Report (Date of earliest event reported): September 19, 2006 CONSECO, INC. (Exact name of registrant as specified in its charter) Delaware 001-31792 75-3108137 - ---------------------- ---------------- -------------- (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) organization) 11825 North Pennsylvania Street Carmel, Indiana 46032 - -------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (317) 817-6100 ------------------------- (Registrant's telephone number, including area code) Not Applicable ---------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 7.01. Regulation FD Disclosure. On September 19, 2006, the Company issued a press release to announce that it has engaged Bank of America Securities LLC and J.P. Morgan Securities Inc. to act as lead arrangers and joint bookrunners in connection with the amendment of its existing senior secured credit agreement. A copy of the Company's press release is filed as Exhibit 99.1 to this Current Report on Form 8-K. Also attached as Exhibit 99.2 is the proposed term sheet for the amended credit facility. Item 9.01. Financial Statements and Exhibits. (c) Exhibits 99.1 Press release of Conseco, Inc. issued September 19, 2006. 99.2 Proposed term sheet for the amended credit facility. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. CONSECO, INC. September 19, 2006 By: /s/ John R. Kline ------------------------ John R. Kline Senior Vice President and Chief Accounting Officer EX-99 2 release.txt EXHIBIT 99.1 Exhibit 99.1 NEWS For Release Immediate Contacts (News Media) Tony Zehnder, EVP Corporate Communications 317.817.4409 (Investors) Lowell Short, SVP, Investor Relations 317.817.2893 Conseco Announces Plans to Refinance Credit Facility Carmel, Ind., September 19, 2006 - Conseco, Inc. (NYSE:CNO) today announced that it has engaged Banc of America Securities LLC and J.P. Morgan Securities Inc. to act as lead arrangers and joint bookrunners in connection with the amendment of its existing senior secured credit agreement, under which there is currently $478 million outstanding. The amendment is expected to provide for, among other things, an increase in the principal amount of the facility to $675 million, an extension of the due date from 2010 to 2013, and covenant modifications. The net proceeds of approximately $200 million would be used to strengthen the capital of the Company's insurance subsidiaries. Conseco, Inc.'s insurance companies help protect working American families and seniors from financial adversity: Medicare supplement, long-term care, cancer, heart/stroke and accident policies protect people against major unplanned expenses; annuities and life insurance products help people plan for their financial futures. For more information, visit Conseco's web site at www.conseco.com. Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for Conseco's products and trends in Conseco's operations or financial results, as well as other statements, contain forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified by the use of terms such as "anticipate," "believe," "plan," "estimate," "expect," "project," "intend," "may," "will," "would," "contemplate," "possible," "attempt," "seek," "should," "could," "goal," "target," "on track," "comfortable with," "optimistic" and similar words, although some forward-looking statements are expressed differently. You should consider statements that contain these words carefully because they describe our expectations, plans, strategies and goals and our beliefs concerning future business conditions, our results of operations, financial position, and our business outlook or they state other "forward-looking" information based on currently available information. Assumptions and other important factors that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, among other things: (i) our ability to achieve an upgrade of the financial strength ratings of our insurance company subsidiaries and the impact of prior rating downgrades on our business; (ii) the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject; (iii) our ability to obtain adequate and timely rate increases on our supplemental health products including our long-term care business; (iv) mortality, morbidity, usage of health care services, persistency and other factors which may affect the profitability of our insurance products; (v) our ability to achieve anticipated expense reductions and levels of operational efficiencies; (vi) the adverse impact of our Predecessor's bankruptcy proceedings on our business operations, and relationships with our customers, employees, regulators, distributors and agents; (vii) performance of our investments; (viii) our ability to continue to recruit and retain productive agents and distribution partners and customer response to new products, distribution channels and marketing initiatives; (ix) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission; (x) general economic conditions and other factors, including prevailing interest rate levels, stock and credit market performance and health care inflation, which may affect (among other things) our ability to sell products and access capital on acceptable terms, the returns on and the market value of our investments, and the -more- Conseco (2) September 19, 2006 lapse rate and profitability of policies; (xi) changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products; and (xii) regulatory changes or actions, including those relating to regulation of the financial affairs of our insurance companies, such as the payment of dividends to us, regulation of financial services affecting (among other things) bank sales and underwriting of insurance products, regulation of the sale, underwriting and pricing of products, and health care regulation affecting health insurance products. Other factors and assumptions not identified above are also relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement. Our forward-looking statements speak only as of the date made. We assume no obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements. - # # # # - EX-99 3 term.txt EXHIBIT 99.2 Exhibit 99.2 CONSECO, INC. $675 NEW SENIOR SECURED TERM LOAN FACILITY(1) SUMMARY OF TERMS AND CONDITIONS BORROWER: Conseco, Inc., a Delaware corporation (the "Borrower"). GUARANTORS: The Subsidiary Guarantors (as defined in the Credit Agreement). All guarantees will be guarantees of payment and not of collection. ADMINISTRATIVE AND COLLATERAL AGENT: Bank of placecountry-regionAmerica, N.A. ("Bank of America"), as sole and exclusive administrative and collateral agent (the "Agent"). SYNDICATION AGENT: JPMorgan Chase Bank, N.A. JOINT LEAD ARRANGERS AND JOINT BOOKRUNNING MANAGER: Banc of America Securities LLC ("BAS") and J.P. Morgan Securities Inc. ("JP Morgan") will act as joint lead Arrangers and joint bookrunning managers (the "Lead Arrangers") for the New Term Loan Facility. LENDERS: A syndicate of banks, financial institutions and institutional lenders (the "Lenders") acceptable to the Lead Arrangers and the Agent and, in the case of any bank, financial institution or institutional lender that is not already party to the Credit Agreement, consented to by the Borrower (which consent shall not be unreasonably withheld or delayed). NEW TERM LOAN FACILITY: A new $675.0 million term loan facility to be used to refinance in full the aggregate principal amount all Term Loans outstanding on the Amendment Effective Date (as defined below) under the Credit Agreement, for general corporate purposes, and to pay related transaction fees and expenses, all of which will be drawn on the Amendment Effective Date (the "New Term Loan Facility"). INCREMENTAL FACILITY: Same as the Existing Credit Agreement, except that the maximum amount of such Incremental Facility shall be increased to $330.0 million. - ------------ (1) Note that, except with respect to the Mandatory Prepayment section and Selected Financial Covenants, which are summarized herein, the terms and conditions of the Revolving Credit Facility under the Credit Agreement remain unchanged unless specifically noted. Page 2 AMENDMENT EFFECTIVE DATE: The date on or before October 31, 2006 on which the conditions to the making of the initial advances under the New Term Loan Facility shall have been satisfied (or waived) (the "Amendment Effective Date"). INTEREST RATES; CALCULATION OF INTEREST AND FEES: The Applicable Margin for the New Term Loan Facility shall be (a) 2.00% per annum, in the case of Eurodollar Rate Loans, and (b) 1.00% per annum, in the case of Base Rate Loans. Each Interest Period in effect in respect of the Term Loans shall be terminated on the Amendment Effective Date and the Borrower shall reimburse each existing Lender for actual losses and expenses incurred pursuant to Section 3.04(d) of the Credit Agreement. MATURITY: The New Term Loan Facility will mature on the date that is the seventh anniversary of the Amendment Effective Date (the "Maturity Date"). SCHEDULED AMORTIZATION: Quarterly amortization of principal (in equal installments), with 0.25% of the initial aggregate amount of loans under the New Term Loan Facility to be payable at the end of each March, June, September and December and the balance due and payable on the Maturity Date (collectively, the "Scheduled Amortization"). OPTIONAL PREPAYMENTS AND COMMITMENT REDUCTIONS: Same as in the Credit Agreement. Optional prepayments will be applied as directed by the Borrower. MANDATORY PREPAYMENTS: Based on the existing Credit Agreement (the terms of which are summarized below), except (i) as specifically noted below, and (ii) that the requirement that the Borrower's Insurance Subsidiaries (other than Conseco Senior Health Insurance Company, Bankers Life Insurance Company of Illinois, Conseco Life Insurance Company of Texas and Bankers Conseco Life Insurance Company) have a financial strength rating of not less than A- from A.M. Best Company, in each case at the time such prepayment is required to be made, shall be amended to apply to the recapture of excess cash flows generated in 2008 (excess cash flow payments for Fiscal Years 2006 and 2007 shall be eliminated) or thereafter (and payment shall be due in the following year). Key Mandatory Repayment Provisions in Credit Agreement. Section 2.08(b) of the Credit Agreement provides for mandatory repayments as set forth in clauses (i) through (vi) below, unless (x) the Debt to Total Capitalization Ratio is equal to or less than 20% and (y) with respect to Excess Cash Flow generated in 2008 or thereafter, each of the Company's Insurance Subsidiaries (other than Conseco Senior Health Insurance Company, Bankers Life Insurance Company of Illinois, Conseco Life Insurance Company of Texas and Bankers Conseco Life Page 3 Insurance Company) has a financial strength rating of not less than A- from A.M. Best Company, in each case at the time such prepayment is required to be made; provided, however, that the foregoing exclusion from the obligation to make mandatory prepayments will not apply to prepayments required in respect of the Net Proceeds of unsecured Indebtedness permitted under Section 7.01(a)(xiv) in excess of $100.0 million in the aggregate and Permitted Convertible Indebtedness. (i) 100% of all Net Proceeds of Indebtedness incurred by the Borrower or any Subsidiary, with exceptions for certain Indebtedness permitted under Section 7.01 of the Credit Agreement; (ii) 50% of all Net Proceeds from issuances of Capital Stock or other equity in the Borrower or any Subsidiary, with certain permitted exceptions (the same as in the current Credit Agreement); (iii) 100% of the Net Proceeds from Assets Sales, subject to an aggregate threshold of $5.0 million, as well as reinvestment provisions; (iv) 100% of the Net Proceeds from Casualty Events, subject to an increased aggregate threshold of $10.0 million (previously $5.0 million in Section 2.08(b)(iv) of the Credit Agreement) as well as replacement provisions (including an amendment to increase in the permissible reinvestment period in Section 2.98(b)(iv) from 180 days and 270 days to one year); (v) 50% of the Excess Cash Flow for each Excess Cash Calculation Period, subject to reductions for amounts required to be returned to or invested in any Insurance Subsidiary and voluntary prepayments of Loans made during the relevant Calculation Period; and (vi) If the Total Revolving Credit Outstandings exceed the availability limit under the Revolving Credit Facility at any time, repayment of the amount equal to such excess. Each prepayment shall be applied first to the Term Loans for application to the next 4 scheduled principal payments thereof after the occurrence of the event giving rise to such prepayment in direct order of maturity, second, to the Term Loans for application ratably to the remaining principal repayment installments thereof until paid in full and, third, to the Revolving Credit Facility in the manner set forth in Section 2.08(d). SECURITY: Same as in the Credit Agreement. CONDITIONS PRECEDENT TO CLOSING: The initial extension of credit under the New Term Loan Facility will be subject to satisfaction (or waiver) of usual and customary conditions precedent for a transaction of this type, and others reasonably deemed appropriate by the Lead Arrangers, including but not limited to: (a) satisfactory documentation for the Amendment executed by the Lenders Page 4 and the Borrower, and, in each case, consented to by each Subsidiary Guarantor; (b) all of the representations and warranties in the Amendment and the Loan Documents shall be true and correct in all material respects (inclusive of all materiality qualifiers); (c) no Defaults or Events of Default shall have occurred and be continuing; (d) absence of any change, occurrence or development that could have a Material Adverse Effect; (e) satisfactory opinions of counsel in respect of the New Term Loan Facility, corporate resolutions, certificates and other documents and continuing perfection of security interests in the Collateral; (f) compliance with margin regulations; (g) payment of the fees set forth in the Fee Letters attached hereto and other reasonable invoiced expenses required to be paid pursuant to the terms of the Commitment Letter and the losses and expenses of each existing Lender pursuant to Section 3.04(d) of the Credit Agreement; and (h) proceeds from the New Term Loan Facility shall be applied to refinance in full the aggregate principal amount all Term Loans outstanding on the Amendment Effective Date under the Credit Agreement and to pay related transaction fees and costs. REPRESENTATIONS AND WARRANTIES: Same as in the Credit Agreement, except that, with respect to the representations and warranties in Sections 5.11(a) and (c) of the Credit Agreement, (x) references to December 31, 2004 shall be amended to refer to December 31, 2005, and (y) references to June 30 and March 31 2005 shall be amended to refer to June 30 and March 31, 2006, respectively. AFFIRMATIVE COVENANTS: Same as in the Credit Agreement. NEGATIVE COVENANTS: Same as in the Credit Agreement with: (a) The following modifications to Article 7: (i) the Capitalized Lease Liabilities and Purchase Money Debt limit in Section 7.01(a)(viii)(A) shall be increased from $40.0 million to $50.0 million; (ii) the intercompany Indebtedness limit in Section 7.01(a)(x) shall be increased from $30.0 million to $40.0 million; (iii) the other unsecured Indebtedness limit in Section 7.01(a)(xiv) shall be increased from $100.0 million to $150.0 million; (iv) the cash collateral securing Permitted Swap Obligations limit in Section 7.02(c) shall be increased from $35.0 million to $60.0 million; Page 5 (v) the cash collateral securing letters of credit issued in respect of obligations to insurers limit in Section 7.02(f)(ii) shall be increased from $15.0 million to $20.0 million; (vi) the Restricted Payments basket in Section 7.08(g)(i) shall be increased from $50.0 million to $150.0 million; (vii) the addition of new Restricted Payment Provisions in Section 7.08 permitting the payment of the cash amount to be paid upon conversion of (A) any Permitted Convertible Indebtedness by the holder thereof, and/or (B) any of the Borrower's 3 1/2% convertible debentures (the "Convertible Debentures"), in each case only so long as, after giving pro forma effect to such payment and conversion, the Debt to Total Capitalization Ratio is equal to or less than 25%; (viii)the Acquisitions (other than Acquisitions constituting Investments) limit in Section 7.09(l)(i) shall be increased from $100.0 million per Fiscal Year and $300.0 million aggregate shall be increased to $150.0 million per Fiscal Year and $450.0 million aggregate; and (ix) the Acquisitions (other than Acquisitions constituting Investments) limit in Section 7.09(l)(ii) (which is also dependent on certain other tests being met) shall be increased from $250.0 million per Fiscal Year and $500.0 million aggregate shall be increased to $500.0 million per Fiscal Year and $1,000.0 million aggregate; (b) Changes to the definition of "Pro Forma Basis" to include reasonably identifiable and factually supportable cost savings certified by an agreed-upon financial officer; (c) Changes to the definition of "Conseco Available Cash Flow" to provide add-backs for recently disclosed litigation expenses, not to exceed an amount to be determined; and (d) Changes to the Credit Agreement provide that, following the conversion into common equity of the Permitted Convertible Indebtedness in May 2007, all calculations for determining compliance with the Interest Coverage Ratio set forth in Section 7.12 of the Credit Agreement shall include payment of cash dividends, on a pro forma basis after giving effect to such conversion, as if such conversion had occurred at the beginning of the period being measured for such pro forma calculation. SPECIFIC FINANCIAL COVENANTS: Same as in the Credit Agreement, unless otherwise noted (each section as summarized below): Page 6 7.11 Debt to Total Capitalization Ratio. The Borrower shall maintain at all times a Debt to Total Capitalization Ratio of not more than 30% (previously 25%). 7.12 Interest Coverage Ratio. The Borrower shall not permit the Interest Coverage Ratio as of the end of any Fiscal Quarter ending during each period set forth below for the four Fiscal Quarters then ended (or, if less, the number of full Fiscal Quarters commencing after the Effective Date) to be less than 2.00 to 1 (eliminating the increase to 2.50 to 1 in July 2007 presently in the Credit Agreement). 7.14 Aggregate RBC Ratio. The Borrower shall not permit the Aggregate RBC Ratio as of the end of any Fiscal Quarter to be less than 250% (there was previously an increase from 245% to 250% in April 2006 under the Credit Agreement). 7.15 Combined Statutory Capital and Surplus Level. The Borrower shall not permit the Combined Statutory Capital and Surplus of the Insurance Subsidiaries as of the end of any Fiscal Quarter to be less than $1,270.0 million. EVENTS OF DEFAULT/ ASSIGNMENTS AND PARTICIPATIONS/ WAIVERS AND AMENDMENTS: Same as in the Credit Agreement, except with an increase in the threshold amounts set forth in Section 8.01(e) (Cross Default, including with respect to Swap Termination Value) and Section 8.01(i) (Judgments) from $40.0 million to $50.0 million. INDEMNIFICATION: Same as in the Credit Agreement. GOVERNING LAW: New York. EXPENSES: Same as in the Credit Agreement. COUNSEL TO THE AGENT: Shearman & Sterling LLP. MISCELLANEOUS: This term sheet is intended as an outline only and does not purport to summarize all the conditions, covenants, representations, warranties and other provisions that would be contained in the Amendment or the Credit Agreement, as amended by the Amendment. Each of the parties shall (i) waive its right to a trial by jury and (ii) submit to New York jurisdiction. -----END PRIVACY-ENHANCED MESSAGE-----