Long teetering on the brink, insurance and finance giant Conseco has filed for Chapter 11 bankruptcy protection. It's the third-largest corporate bankruptcy filing in history.
The company collapsed under a huge debt load resulting from a rash of acquisitions in the 1990s, including the $6 billion purchase of Green Tree, the nation's largest lender to mobile-home buyers.
The portfolio of mobile-home loans and other consumer finance products will be sold under an agreement with two groups of investors. The bankruptcy filing does not include Conseco's insurance operations, which regulators and the company insist are sound.
Under the terms of a tentative bankruptcy agreement, Conseco Finance Corp. will be sold to CFN Investment Holdings LLC. Conseco Finance became insolvent after it failed to make a $4.7 million payment that was due Dec. 4.
Conseco is the nation's 26th-largest life insurance company. It collected $5.6 billion in premiums last year and has 5.7 million policyholders. Its portfolio includes traditional life insurance, annuities and supplemental health coverage.
Conseco's troubles began two years ago, in what some say was a foreshadowing of Enron and other celebrated collapses. The company went on an acquisition binge, taking on a huge debt load that is now the basis of its plight.
Most observers see Conseco's purchase of Green Tree Financial as its downfall (story). Green Tree was the nation's largest lender in the mobile home market, which turned out to be much riskier than Conseco had realized.
Conseco hasn't been tight with a buck.
Shortly after the Green Tree deal, the company recruited General Electric wizard Gary C. Wendt as CEO, awarding him one of the lushest contracts in history, worth at least $75 million and gauranteeing him a retirement annuity of $1.5 million yearly. The company also made loans of nearly $550 million to its executives and directors. No one seriously expects any of those to be repaid.
Wendt is throwing ballast overboard as fast as possible. The company said Friday it would halt interest payments on about half of its $2.6 billion in bonds for at least the next 30 days.
Wendt is celebrated for his business acumen and for his bitter and very public divorce from his first wife, Lorna, several years ago. She sought to be compensated for her alleged role in Wendt's success at GE Capital.