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Conseco in Chapter 11, punctuating dismal downfall
December 18, 2002
Less than a month after posting a quarterly loss of $1.8 billion and warning that it would seek Chapter 11 bankruptcy protection if it could reach agreement with its creditors, the hammer fell Tuesday night as the Carmel, IN finance company sought history’s third-largest bankruptcy.
Some underwriters had been refusing to accept checks from Conseco Finance, the giant’s mortgage and home equity lending arm, months ago. Nationwide Appraisal Services Senior Vice President Mark Oliver said his company “wound down” its relationship with Conseco due to the amount of publicity the company has received in recent weeks. And, while they may not work with Conseco anymore, Oliver said, “From my perspective, if my clients were in that kind of situation, I’d certainly be concerned.”
CF established Convergent Lending Services, a subsidiary, to provide appraisal, title and settlement services, earlier this year, powered by ATM Corp. of America systems. Located in the Pittsburgh, PA area, the new subsidiary initially employed about 100 people, and had ambitious plans to add 50 to 80 employees within the next two years.
CF President Chuck Cremens reassured the public not long ago that CF is “managed, regulated and operated independently from Conseco Inc.,” even while the company obtained a temporary waiver of a cross-default provision from one lender (who was not named) whose financing agreement contained a cross-default if the parent company defaults on is bond debt.
Parent Conseco announced on September 9 that it would exercise the 30-day grace periods on upcoming bond interest payments and would begin restructuring discussions with its debt holders. And, as a result of bond payments not being made, Fitch Ratings dropped its corporate credit ratings from a “C” to a “D” for default.
On the eve of the expiration of those grace periods, Gary Wendt, Conseco, Inc. CEO, resigned in what Standard & Poor's credit analyst Jayan U. Dhru said amounted to “a prelude to an ultimate bankruptcy filing.”
Wendt had come on board the troubled company in spring 2000 in a hiring made in reaction to a botched acquisition of St. Paul, MN-based Green Tree Financial, a home equity and manufactured housing lender. As long ago as May, 2002, Fitch Ratings had stated it was “particularly concerned with the current credit quality of Conseco Finance,” in a less-than-glowing Research Report on the status of manufactured housing portfolios.
“While there are subtle differences in the performance of manufactured housing portfolios, the general trends have been similar for all issuers,” Fitch reported. “Liberal underwriting and the challenges associated with servicing this unique asset have lead to higher defaults, loss severities and losses than first estimated.”
December 18, 2002
Less than a month after posting a quarterly loss of $1.8 billion and warning that it would seek Chapter 11 bankruptcy protection if it could reach agreement with its creditors, the hammer fell Tuesday night as the Carmel, IN finance company sought history’s third-largest bankruptcy.
Some underwriters had been refusing to accept checks from Conseco Finance, the giant’s mortgage and home equity lending arm, months ago. Nationwide Appraisal Services Senior Vice President Mark Oliver said his company “wound down” its relationship with Conseco due to the amount of publicity the company has received in recent weeks. And, while they may not work with Conseco anymore, Oliver said, “From my perspective, if my clients were in that kind of situation, I’d certainly be concerned.”
CF established Convergent Lending Services, a subsidiary, to provide appraisal, title and settlement services, earlier this year, powered by ATM Corp. of America systems. Located in the Pittsburgh, PA area, the new subsidiary initially employed about 100 people, and had ambitious plans to add 50 to 80 employees within the next two years.
CF President Chuck Cremens reassured the public not long ago that CF is “managed, regulated and operated independently from Conseco Inc.,” even while the company obtained a temporary waiver of a cross-default provision from one lender (who was not named) whose financing agreement contained a cross-default if the parent company defaults on is bond debt.
Parent Conseco announced on September 9 that it would exercise the 30-day grace periods on upcoming bond interest payments and would begin restructuring discussions with its debt holders. And, as a result of bond payments not being made, Fitch Ratings dropped its corporate credit ratings from a “C” to a “D” for default.
On the eve of the expiration of those grace periods, Gary Wendt, Conseco, Inc. CEO, resigned in what Standard & Poor's credit analyst Jayan U. Dhru said amounted to “a prelude to an ultimate bankruptcy filing.”
Wendt had come on board the troubled company in spring 2000 in a hiring made in reaction to a botched acquisition of St. Paul, MN-based Green Tree Financial, a home equity and manufactured housing lender. As long ago as May, 2002, Fitch Ratings had stated it was “particularly concerned with the current credit quality of Conseco Finance,” in a less-than-glowing Research Report on the status of manufactured housing portfolios.
“While there are subtle differences in the performance of manufactured housing portfolios, the general trends have been similar for all issuers,” Fitch reported. “Liberal underwriting and the challenges associated with servicing this unique asset have lead to higher defaults, loss severities and losses than first estimated.”
