UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): August 15, 2005
CONSECO, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-31792 75-3108137
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
organization)
11825 North Pennsylvania Street
Carmel, Indiana 46032
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(Address of principal executive offices) (Zip Code)
(317) 817-6100
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address,
if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
See disclosure under Item 2.03 of this Current Report, which is
incorporated by reference in this Item 1.01.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On August 15, 2005, Conseco, Inc. (the "Company") issued a press
release to state that it closed its previously announced private offering of
3.50% Convertible Debentures due September 30, 2035 (the "Debentures") and
completed the amendment of its senior secured credit facility. A copy of the
Company's press release is filed as Exhibit 99.1 to this Current Report on Form
8-K.
The Debentures were offered only to qualified institutional buyers
under Rule 144A of the Securities Act of 1933, as amended. The initial
purchasers in the Debenture offering exercised their option to purchase an
additional $30 million of Debentures, bringing the total principal amount of the
offering to $330 million. Net proceeds from the offering of approximately $320
million were applied to repay term loans outstanding under the Company's senior
credit facility. The terms of the Debentures are governed by an indenture dated
as of August 15, 2005 between the Company and The Bank of New York Trust
Company, N.A., as trustee (the "Indenture").
The Debentures represent the Company's senior, unsecured obligations
and bear interest at a rate of 3.50 percent per year, payable semi-annually,
beginning on March 31, 2006 and ending on September 30, 2010. Thereafter, the
principal amount of the Debentures will accrete at a rate that provides holders
with an aggregate yield to maturity of 3.50 percent, computed on a semi-annual,
bond-equivalent basis. The Company will pay contingent interest on the
Debentures for any six-month interest period from and including March 31 to and
including September 29 or from and including September 30 to and including March
30, beginning with the six-month interest period commencing on September 30,
2010, if the average trading price per Debenture for the five trading day period
immediately preceding the six-month interest period equals or exceeds a certain
level, as described in the Indenture.
The Debentures will be convertible at the option of the holders, upon
the occurrence of certain specified events, into cash or, under certain
circumstances, cash and shares of the Company's common stock at an initial
conversion price of approximately $26.66 per share. The number of shares to be
received by a converting holder is subject to adjustment for certain dilutive
events. The amount of cash to be received upon conversion is equal to the lesser
of (i) the accreted principal amount of the converting Debenture and (ii) the
conversion value of such Debentures (as calculated in accordance with the
Indenture).
On or after October 5, 2010, the Company may redeem for cash all or a
portion of the Debentures at any time at a redemption price equal to 100 percent
of the accreted principal amount of the Debentures plus accrued and unpaid
interest, including additional interest and contingent interest, if any, to the
redemption date. Holders may require the Company to repurchase in cash all or
any portion of the Debentures on September 30, 2010, 2015, 2020, 2025 and 2030
at a repurchase price equal to 100 percent of the accreted principal amount of
the Debentures to be repurchased, plus accrued and unpaid interest, including
additional interest and contingent interest, if any, to the applicable
repurchase date.
Holders of the Debentures may convert their Debentures only under the
following circumstances: (i) prior to September 30, 2034, if the price of the
Company's common stock reaches a specified threshold, (ii) prior to September
30, 2034, if the trading price for the Debentures falls below a specified
threshold, (iii) at any time on or after September 30, 2034, (iv) if the
Debentures have been called for redemption or (v) if specified corporate
transactions occur. The holders' ability to convert their Debentures prior to
September 30, 2010 (except in connection with a "fundamental change"), however,
will be subject to the limitations imposed by the Company's senior credit
facility, and by any limitations in any other credit facilities or indebtedness
that the Company may incur in the future. If holders convert their Debentures in
connection with a "change in control" of the Company prior to September 30,
2010, the holders will be entitled to receive additional shares of common stock
as set forth on a table in the Indenture, provided that no increase will be made
if at least 90 percent of the consideration paid for the Company's common stock
in the change of control transaction consists of securities quoted on an
established over-the-counter market or traded on a United States national
securities exchange (or that will be so quoted or traded immediately following
the transaction).
If an event of default occurs and is continuing with respect to the
Debentures, either the trustee or the holders of at least 25 percent in
aggregate accreted principal amount of the Debentures then outstanding may
declare the accreted principal amount, plus accrued and unpaid interest,
including additional interest and contingent interest, if any, on the Debentures
to be due and payable immediately. If an event of default relating to certain
events of bankruptcy, insolvency or reorganization occurs, the accreted
principal amount plus accrued and unpaid interest, including additional interest
and contingent interest, if any, on the Debentures automatically will become
immediately due and payable. The following are events of default with respect to
the Debentures:
o default for 30 days in payment of any interest, contingent interest or
additional interest due and payable on the Debentures;
o default in payment of accreted principal of the Debentures at
maturity, upon redemption, upon repurchase or following a fundamental
change, when the same becomes due and payable;
o default by the Company or any of its subsidiaries in the payment of
principal, interest or premium when due under any other instruments of
indebtedness having an aggregate outstanding principal amount of $50.0
million (or its equivalent in any other currency or currencies) or
more, following a specified period for cure;
o default in the Company's conversion obligations upon exercise of a
holder's conversion right, following a specified period for cure;
o default in the Company's obligations to give notice of the occurrence
of a fundamental change within the time required to give such notice;
o acceleration of any of the Company's indebtedness or the indebtedness
of any of its subsidiaries under any instrument or instruments
evidencing indebtedness (other than the Debentures) having an
aggregate outstanding principal amount of $50.0 million (or its
equivalent in any other currency or currencies) or more, subject to
certain exceptions;
o default in the Company's performance of any other covenants or
agreements contained in the Indenture or the Debentures for 60 days
after written notice to us from the trustee or the holders of at least
25 percent in aggregate principal amount of the Debentures; and
o certain events of bankruptcy, insolvency and reorganization of us or
any of the Company's subsidiaries.
On August 15, 2005, in connection with the sale of the Debentures, the
Company also entered into a Registration Rights Agreement (the "Registration
Rights Agreement") with the initial purchasers. Pursuant to that agreement, the
Company agreed to file with the Securities and Exchange Commission within 90
days, and to use its reasonable best efforts to cause to become effective within
210 days, a shelf registration statement with respect to the resale of the
Debentures and the sale of the Company's shares of common stock issuable upon
conversion of the Debentures. If the Company fails to comply with certain of its
obligations under the Registration Rights Agreement, additional interest will be
payable on the Debentures.
The amendment of the senior credit facility provides for, among other
things:
o A reduction in the principal amount of the facility from $767 million
to $447 million, using proceeds from the Debenture offering described
above;
o A reduction in the interest spread on the term loan from 350 basis
points over LIBOR to 200 basis points over LIBOR, with a further
reduction to 175 basis points over LIBOR when the Company's credit
facility is rated Ba3 by Moody's Investor Services, Inc.;
o Relaxed financial covenants and increased flexibility for the Company
to enter into capital markets transactions.
Certain of the initial purchasers in the Debenture offering and their
respective affiliates have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking services for the
Company, for which they received or will receive customary fees and expenses.
Bank of America, N.A. and JPMorgan Chase Bank, N.A., affiliates of Banc of
America Securities LLC and J.P. Morgan Securities Inc., respectively, are
lenders under the Company's senior credit facility, and received a portion of
the amounts to be repaid under the senior credit facility from the Debenture
offering. Banc of America Securities LLC and J.P. Morgan Securities Inc. are
lead arrangers and joint bookrunners under the senior credit facility. In
addition, Goldman Sachs Credit Partners L.P., Morgan Stanley Senior Funding,
Inc., and Lehman Commercial Paper Inc., affiliates of Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated and Lehman Brothers Inc., respectively, have
become lenders under the Company's senior credit facility. Certain of the
initial purchasers individually own less than five percent of the Company's
outstanding common stock and common stock equivalents. Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated, Banc of America Securities LLC and J.P.
Morgan Securities Inc. also acted as underwriters in public offerings of the
Company's common stock and class B preferred stock.
The foregoing description of the private placement and the amendment
to the senior credit facility does not purport to be complete and is qualified
in its entirety by reference to the Indenture, the Registration Rights
Agreement, and the Amended and Restated Credit Agreement dated as of August 15,
2005 among Conseco, Inc., Bank of America, N.A., as Agent, JPMorgan Chase Bank,
N.A., as Syndication Agent, and other financial institutions, which are attached
hereto as Exhibits 4.4, 4.5 and 10.1.
Item 3.02. Unregistered Sales of Equity Securities.
See disclosure under Item 2.03 of this Current Report, which is
incorporated by reference in this Item 3.02.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
4.4 Indenture dated as of August 15, 2005 for 3.50% Convertible
Debentures due September 30, 2035 between Conseco, Inc. and The Bank
of New York Trust Company, N.A., as Trustee.
4.5 Registration Rights Agreement dated as of August 15, 2005 among
Conseco, Inc. and Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated and J.P. Morgan Securities, Inc., as representatives of
several purchasers of the 3.50% Convertible Debentures due September
30, 2035.
10.1 Amended and Restated Credit Agreement dated as of August 15, 2005
among Conseco, Inc., Bank of America, N.A., as Agent, JPMorgan Chase
Bank, N.A., as Syndication Agent, and other financial institutions.
99.1 Press release of Conseco, Inc. issued August 15, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
CONSECO, INC.
August 16, 2005
By: /s/ John R. Kline
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John R. Kline
Senior Vice President and
Chief Accounting Officer