The bank debt of Conseco was said to have traded in the low 60s last week, shooting up from the 52 level where it had been trading since the company announced that it would have to pursue a more aggressive restructuring plan. Market players have mixed feelings about the name. "The story is still unfolding," one dealer said, predicting that the paper would remain in the 60s for at least another month. "It's hard to value," he added.
Investors are worried that the company ultimately might file for bankruptcy. If Conseco goes bankrupt, the insurance aspect of the business gets taken over by regulators and there would be a two-headed dragon leading the company, the dealer explained. Some traders, however, still say the paper is worth par in the end. One market source noted that the insurance assets have worth.
Conseco decided to exercise a 30-day grace period, which expires Sept. 9, on missed bond interest payments and currently is involved in discussions with its debt holders. "We cannot predict whether any restructuring will be effected out-of-court or through a Chapter 11 bankruptcy proceeding, nor can we predict how long any restructuring of our debt will be required to implement," the company stated in its latest 10Q. "If we are unable to achieve a consensual restructuring, we will be unable to satisfy all of our debt obligations and we will be forced to petition for relief under the U.S. Bankruptcy Code."