Content area
Full Text
The debt-restructuring deal analysts believe will help return Conseco Inc. to financial health does not provide similar salvation for the 155 former and current insiders who owe $537 million on loans they used to buy company stock that's now almost worthless.
People familiar with the debtrestructuring plan say it excuses none of those loans. In fact, they say, Conseco's Chapter 11 bankruptcy filing in Chicago last week might even give the banks the legal right to try to collect on the loans before they'd otherwise come due in December 2003.
Conseco serves as the guarantor on the loans, meaning it is on the hook if borrowers don't pay. If Conseco or the banks push borrowers to pay, many would unleash a host of legal arguments for why they shouldn't have to, former executives and legal observers said.
"Somebody is going to be suing those borrowers at some point in time. Then the borrowers will raise their defenses, and we'll see how it washes," said Indianapolis bankruptcy attorney Steve Ancel. Ancel represents several major participants in the program, including Indianapolis doctor David Decatur, a former director who borrowed $19 million.
The borrower with the most on the line is former CEO Stephen C. Hilbert, who owes $155 million in principal on loans issued in the midand late 1990s, before Conseco shares collapsed.
To win entry into a program extending the due date on his loan to the end of 2003, Hilbert two years ago agreed to provide Conseco with at least $19 million in collateral. Records in the Hamilton County Recorder's Office show that collateral now includes his mansion on West 116th Street, perhaps the state's grandest home, raising the specter that Conseco would seize it if Hilbert proves unable to pay.
Hilbert and representatives of the bank group, led by Charlotte, N.C.based Bank of America and New York-based J.P. Morgan Chase and Co., declined to comment last week.
Company mum on plan
Conseco late last week had not...