To provide covenant relief in exchange for additional principal payments
Conseco has reported that it is seeking an amendment to its senior credit facility. The amendment would become effective upon the closing of its proposed public offering of common stock.
The company said that the changes to the senior credit facility include the minimum risk-based capital ratio requirement would remain at 200% through December 31, 2010 and would increase to 225% for 2011 and 250% for 2012, required minimum level of statutory capital and surplus would remain at $1.1 billion and would increase to $1.2 billion for 2011 and $1.3b for 2012, the interest coverage ratio requirement would remain at 1.5x and would increase to 1.75x for 2011 and 2.0x for 2012.
In addition, the changes also include the debt to total capital ratio requirement would remain at 32.5% through December 31, 2009 and would change to 30.0% thereafter. In exchange for the covenant relief, the company agrees to pay $150m of the first $200m of net proceeds from its proposed public offering of common stock to the lenders and, in addition, to pay 50% of any net proceeds in excess of $200m from the offering.
According to Conseco, the amendment would modify its principal repayment schedule to eliminate any principal payments in 2010 and provides for principal payments of $35m in 2011, $40m in 2012 and $40m in 2013. The current principal balance of the senior credit facility is $817.8m, and the senior credit facility matures in October 2013.
Ed Bonach, CFO of Conseco, said: This amendment would provide additional covenant margin over the next two years, allowing us greater focus on profitably growing our business segments and increasing shareholder value.”
Conseco’s insurance companies supplies medicare supplement, long-term care, cancer, heart/stroke and accident policies protect people against major unplanned expenses; annuities and life insurance products.