Conseco files for Chapter 11

| 12/19/2002

Conseco Inc. announced Dec. 17 it would file for protection under Chapter 11 bankruptcy laws.

The filing - a "voluntary petition to reorganize" - is the third largest bankruptcy in U.S. history, according to media reports.

In a release Dec. 18, the Carmel, IN-based company said the filing included only some of its subsidiaries, including several related to its finance operations. Conseco's insurance companies are separate legal entities and are not included in the filing.

The assets and operations of Conseco Finance, which is based in St. Paul, MN, will be purchased by CFN Investment Holdings, a joint venture of Fortress Investment Group, J.C. Flowers & Co. and Cerberus Capital Management. However, CFN will have the option of leaving some of Conseco Finance's assets out of the sale.

The case hit close to home for a number of truckdrivers who have their rigs financed through Conseco. Many of those drivers are wondering how recent events will affect them.

"We've had several calls today," Gary Green of OOIDA's Business Services division told Land Line. The callers have asked how the Chapter 11 filing will affect their payments, and who to send their payments to. While all the answers aren't available yet, Green does have a few suggestions.

"Regardless of whether these guys are going bankrupt, you have to make your truck payments," Green said. "You can't stop making them because they are bankrupt. You've got to protect yourself by making those payments."

Green said truckers should mail their payments in a way that provides proof of delivery so they are protected if the finance company loses any payments or records during the switch to a new owner.

"During this transition period they should be sure and do any payments by certified, registered mail, and get return receipts requested," Green said. The return receipt will provide truckers with proof the payment has been delivered. Otherwise, Green said, truckers could face problems if the company says they did not receive the money.

"Right now, we're telling them to send your payments to whoever you're supposed to, as it was established, but do it certified, registered mail," he said.

Green strongly discouraged truckers from doing phone payments - even if they are encouraged by the company to do so - particularly because it provides no paper proof the payment arrived on time.

"Even though you get confirmation numbers, you can't be sure who's going to retain those records, where are the records going," Green said.

A spokeswoman at Conseco Finance did not return calls from Land Line by press time.

The case is now before Bankruptcy Judge Carol A. Doyle in Chicago, Dow Jones Newswire reported. James H.M. Sprayregen, the company's lead attorney, told the judge Dec. 18 that Conseco expected to emerge from bankruptcy by the second quarter of next year.

The company owed creditors $6.5 billion related to acquisitions during the 1990s, including one that gave the firm the largest collection of mobile-home loans in the country, according to a report from The Associated Press.

Not all of Conseco's creditors have given the green light to the restructuring plan, a company spokesman told Reuters news service. However, the plan has not yet been finalized.

--By Mark H. Reddig, associate editor