September 29, 2000
Contact
Title
Name
Address
City, State, Zip
Dear ______:
As an important Conseco shareholder, I want to write you
directly to emphasize the progress made in the debt restructuring announced just
one week ago.
The enclosed news release describes the major terms of the
agreements reached on Sept. 22. (Also enclosed are three charts from the
presentation we used when presenting our plan to the banks and rating agencies.
The charts are part of the materials furnished to securities analysts as filed
with SEC under cover of a Form 8-K/A. The documentation relating to our bank
debt restructuring is also part of that Form 8-K/A. The Form 8-K/A is available
at the SEC's Internet web site at http:\\www.sec.gov.)
Part of this last point is worth emphasizing: the capital
plan is completely OURS. We made it clear to the banks at the outset that
restructuring our debt was only part of a larger plan to make our operating
businesses strong and profitable. In order to accomplish this mission, we needed
the banks to give us time and flexibility. We got both. And we are grateful to
our 25 lender banks for their confidence.
Without going into extensive detail, these three charts
summarize the goals of our "Restoration Plan."
A. Accumulation/Reduction of Conseco Corporate Debt: Shows the
end of excessive leverage and the start of cash from
operations covering debt costs.
B. Restoration Program Outcome: Shows $3,080,000,000 of debt
being paid down; the anticipated conversion of $500 million of
trust preferreds to common stock; and the debt to total
capital ratios that result.
C. Conclusion: Shows progress to date (restructuring) and
areas to which our focus will now turn (realignment and
reinvigoration).
<PAGE>
Hopefully, you won't view this letter as redundant. But,
rather, will understand the need to continue to focus on factual information as
long as substantial economic interests exist in the marketplace that would
prefer the perception of distress.
We thank you for your patience these last 10 weeks as we
worked toward successful debt restructuring. With that completed, we turn our
full energies to creating value for our customers and our stockholders.
Very truly yours,
Gary C. Wendt
Chairman and CEO
Enclosure
2
<PAGE>
ATTACHMENT 1
------------
FOR RELEASE Immediate
CONTACTS (NEWS MEDIA) Mark Lubbers, EVP, External Relations 317.817.4418
(INVESTORS) Tammy Hill, SVP, Investor Relations 317.817.2893
CONSECO "RESTORATION PLAN" MOVES FORWARD
COMPANY AND BANKS CLOSE ON DEBT RESTRUCTURING
DEBT TO BE CUT BY $3 BILLION OVER 3 YEARS
INDIANAPOLIS, IND.: SEPT. 22, 2000 - Conseco, Inc. (NYSE:CNC) today
announced that its lender banks have signed amendments that will restructure the
company's credit facilities. The restructuring of this debt is a key component
of the "Restoration Plan" initiated by Gary C. Wendt after he joined Conseco on
June 29 as Chairman and CEO.
The agreement with the banks covers $2.8 billion of debt held by a
25-bank consortium led by Bank of America and Chase Manhattan Bank.
Wendt called the terms of the debt restructuring important news, but
said, "the larger story here - what we call the Conseco Restoration Plan - is
the complete re-engineering of the company's financial structure. We are
executing a plan that provides long term stability and flexibility for our
capital structure."
Over the past four years, Conseco's bank and public debt had increased
to approximately $5.9 billion. The Restoration Plan calls for reducing the
company's debt by more than $3 billion by year-end 2003, reducing Conseco's debt
from 41% of total capital to less than 25%. More importantly, the Restoration
Plan allows Conseco to meet its debt obligations and improve its capital
structure dramatically without impacting its core businesses.
The beginning elements of the Conseco Restoration Plan center around
two initiatives: (1) selling non-strategic assets of the company, and (2)
restructuring the operations of Conseco Finance. These initiatives to generate
cash were implemented by Wendt soon after his arrival at Conseco; they have
proceeded ahead of schedule.
-more-
<PAGE>
Conseco (2)
Sept. 22, 2000
Over the next three years, these two cash-generating components of the
Restoration Plan are designed to enable Conseco to repay $1.52 billion in bank
debt and $1.56 billion in public debt.
To begin the debt reduction program the company has identified more
than $2 billion in assets to be sold or monetized. More than $700 million of
proceeds from these activities have already been realized; total proceeds are
expected to exceed $1 billion by year-end 2000.
The initial stages of the restructuring of Conseco Finance operations
were announced on July 27. That plan, designed to assure stable growth, included
the lay-off of 2000 employees and over $150 million in annual expense
reductions.
Major elements of the Restoration Plan, including terms of the bank
debt restructuring, include:
o Payment of $650 million in bank debt on September 22, 2000;
o Payment of 2001 and 2002 public debt as scheduled ($131
million in December 2000 and $668 million in June 2001);
o Extension of $571 million of bank debt to December 31, 2001
funded by the sale of non-strategic assets;
o Payment of 2003 and 2004 public debt as scheduled ($450
million in October 2002 and $310 million in February 2003);
o On $1.5 billion of bank debt previously due September 2003,
payments of $150 million in each of 2002 and 2003, with an
option to extend the remaining $1.2 billion to 2005;
o Extension to December 2003 of the $570 million of loans and
related Conseco guarantees comprising the Conseco directors
and officers stock purchase program (to qualify for the loan
and guarantee extensions, borrowers will be required to enter
into a revised lending program, which will be finalized in the
4th quarter);
o Suspension of the dividend on Conseco common stock beginning
in the current quarter (providing approximately $18 million
per quarter toward the financial restructuring);
Wendt said that winning back top-drawer insurance and debt ratings
would be the next step in the Restoration Plan. "With a stable and flexible
financial structure in place, we can turn our full attention to building
consistently profitable business operations."
- # # # # -
WORLD WIDE WEB http://www.conseco.com
INVESTOR HOTLINE 800.4.CONSECO
FAX-ON-DEMAND 800.344.6452
<PAGE>
Conseco (3)
Sept. 22, 2000
Note on forward-looking statements: All statements, trend analyses and other
information contained in this release and elsewhere (such as in filings by
Conseco with the Securities and Exchange Commission, press releases,
presentations by Conseco or its management or oral statements) relative to
markets for Conseco's products and trends in Conseco's operations or financial
results, as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "expect," "intend," "will," "should," "could,"
"goal," "target," "on track," "comfortable with," "optimistic" and other similar
expressions, constitute forward-looking statements under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
known and unknown risks, uncertainties and other factors which may cause actual
results to be materially different from those contemplated by the
forward-looking statements. Such factors include, among other things: (1)
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) Conseco's ability to sell its products,
its ability to make loans and access capital resources and the costs associated
therewith, the market value of Conseco's investments, the lapse rate and
profitability of policies, and the level of defaults and prepayments of loans
made by Conseco; (2) Conseco's ability to achieve anticipated synergies and
levels of operational efficiencies; (3) customer response to new products,
distribution channels and marketing initiatives; (4) mortality, morbidity, usage
of health care services and other factors which may affect the profitability of
Conseco's insurance products; (5) performance of our investments; (6) changes in
the Federal income tax laws and regulations which may affect the relative tax
advantages of some of Conseco's products; (7) increasing competition in the sale
of insurance and annuities and in the finance business; (8) regulatory changes
or actions, including those relating to 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; (9) the outcome of
Conseco's efforts to sell assets and reduce, refinance or modify indebtedness
and the availability and cost of capital in connection with this process; (10)
actions by rating agencies and the effects of past or future actions by these
agencies on Conseco's business; and (11) the risk factors or uncertainties
listed from time to time in Conseco's filings with the Securities and Exchange
Commission.
<PAGE>
ATTACHMENT 2
------------
Note on forward-looking statements: All statements, trend analyses and other
information contained in this release and elsewhere (such as in filings by
Conseco with the Securities and Exchange Commission, press releases,
presentations by Conseco or its management or oral statements) relative to
markets for Conseco's products and trends in Conseco's operations or financial
results, as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "expect," "intend," "will," "should," "could,"
"goal," "target," "on track," "comfortable with," "optimistic" and other similar
expressions, constitute forward-looking statements under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
known and unknown risks, uncertainties and other factors which may cause actual
results to be materially different from those contemplated by the
forward-looking statements. Such factors include, among other things: (1)
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) Conseco's ability to sell its products,
its ability to make loans and access capital resources and the costs associated
therewith, the market value of Conseco's investments, the lapse rate and
profitability of policies, and the level of defaults and prepayments of loans
made by Conseco; (2) Conseco's ability to achieve anticipated synergies and
levels of operational efficiencies; (3) customer response to new products,
distribution channels and marketing initiatives; (4) mortality, morbidity, usage
of health care services and other factors which may affect the profitability of
Conseco's insurance products; (5) performance of our investments; (6) changes in
the Federal income tax laws and regulations which may affect the relative tax
advantages of some of Conseco's products; (7) increasing competition in the sale
of insurance and annuities and in the finance business; (8) regulatory changes
or actions, including those relating to 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; (9) the outcome of
Conseco's efforts to sell assets and reduce, refinance or modify indebtedness
and the availability and cost of capital in connection with this process; (10)
actions by rating agencies and the effects of past or future actions by these
agencies on Conseco's business; and (11) the risk factors or uncertainties
listed from time to time in Conseco's filings with the Securities and Exchange
Commission.
<PAGE>
CHART A
-------
Strong Operating Businesses Will Cover Fixed Charges Conseco Logo
During '01 (first time since '97)
Debt and Trust Preferred Paydown Plan
Bar Chart Graphic demonstrating levels of Public Debt, Bank Debt and Trust
Preferreds.
<TABLE>
<CAPTION>
First Half
CASH INFLOWS 1996 1997 1998 1999 2000
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Insurance Companies $221.2 $326.0 $ 277.7 $ 361.8 $225.0
Finance Company - - (1,971.0) (1,246.0) (284.0)
Other 1.6 (19.9) 17.6 (23.3) 28.5
---------------------------------------------------------------------------------
Total Operating Cash Flow $222.8 $306.1 $(1,675.7) $ (907.5) $(30.5)
=================================================================================
Second Half
CASH INFLOWS 2000 2001 2002 2003
---------------------------------------------------------------------
Insurance Companies $ 225.0 $450.0 $475.0 $510.0
Finance Company 50.0 250.0 335.0 385.0
Other - - - -
---------------------------------------------------------------------
Total Operating Cash Flow $ 275.0 $700.0 $810.0 $895.0
=====================================================================
</TABLE>
<PAGE>
CHART B
-------
Restoration Program Outcome Conseco Logo
- Debt and preferred paydown exceed $3.5 billion under plan
- Lowest debt/equity ratio since 1996 by end of 2003
<TABLE>
<CAPTION>
----------------
DEBT
($'s in millions) 12/31/97 12/31/98 12/31/99 6/30/00 12/31/00 12/31/01 12/31/02 12/31/03 PAID DOWN
--------------------------------------------- --------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bank debt $ 1,850 $ 2,280 $ 2,180 $ 2,720 $ 1,970 $ 1,500 $ 1,350 $ 1,200 $ 1,520
Public debt 500 1,540 2,660 3,180 3,040 2,380 1,930 1,620 1,560
--------------------------------------------- --------------------------------------------- ----------------
Total debt 2,350 3,820 4,840 5,900 5,010 3,880 3,280 2,820 $ 3,080
================
Trust preferreds 1,400 2,130 2,680 2,430 2,430 1,930 1,930 1,930 $ 500
----------------
Common equity 5,220 5,300 6,330 5,890 5,890 6,900 7,420 7,950 $3,580
--------------------------------------------- ---------------------------------------------
Total capital $ 8,970 $ 11,250 $ 13,850 $ 14,220 $ 13,330 $ 12,710 $ 12,630 $ 12,700 = TOTAL PAYDOWNS
============================================= ============================================= ----------------
----------------
Debt to total capital 26.2% 34.0% 34.9% 41.5% 37.6% 30.5% 26.0% 22.2%
</TABLE>
-------------------------------------
At Close, Net Debt = $4,941 mm Debt Service = $500 mm
Running Rate '01 Cash from Operations = $700 mm
Coverage on Bank & Public Debt = 1.4X Total Coverage =
1.1X
-------------------------------------
<PAGE>
CHART C
-------
Conclusion Conseco Logo
o The Company Has Achieved the First Major Stride in Its "Restoration
Plan"
o Restructuring:
o Manage Holding Company Debt
-- Agreements in Place
o Disposing of or Closing Non-Strategic Assets
--Well Underway
o Realignment
o Cost Reductions
--Executed at Finance
--Begun Process at Insurance Operations
o Setting Responsible - but Stretch Goals
--Done
o Pay for Performance
--In Process
o Reinvigoration
o Quality
o Productivity
o Growth
