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Conseco, Inc. (NYSE: CNO) announced today that, as part of a series of transactions intended to enhance its capital position, it entered into a stock and warrant purchase agreement with John Paulson's Paulson & Co. Inc., on behalf of the several investment funds and accounts managed by it, to sell to Paulson 16.4 million shares of common stock and warrants to purchase 5.0 million shares of common stock for an aggregate purchase price of $77.9 million.
In addition, Conseco announced its intention to privately offer, subject to certain conditions, up to $293.0 million aggregate principal amount of convertible senior debentures to fund a substantial portion of the purchase price of its existing convertible debentures that are tendered in a cash tender offer for its existing convertible debentures that Conseco intends to commence in the near future.
Upon closing the private sale of common stock, Paulson will own approximately 9.9% of Conseco's outstanding shares, including shares Paulson previously acquired in open market transactions. Conseco will grant certain registration rights to Paulson in connection with its acquisition of the common stock and warrants. Half of the net proceeds from the issuance of these shares will be used to repay indebtedness under Conseco's credit agreement.
The remaining net proceeds will be used:
- to pay the portion of the purchase price of the existing convertible debentures that are tendered in the cash tender offer that Conseco intends to commence for such debentures (or any subsequent issuer tender offer that expires on or prior to October 5, 2010) that is not funded by the issuance of new convertible debentures;
- to pay the portion of the repurchase price of the existing convertible debentures on September 30, 2010 that Conseco is required by the holders thereof to repurchase that is not funded by the issuance of new convertible debentures, if any;
- to pay the portion of the redemption price of existing convertible debentures on October 5, 2010 that is not funded by the issuance of new convertible debentures, if any existing convertible debentures remain outstanding at that time and Conseco elects to redeem such existing convertible debentures; and
- for general corporate purposes.
The warrants that Paulson will receive will have an exercise price of $6.50 per share of common stock, subject to customary anti-dilution adjustments. Prior to June 30, 2013, the warrants will not be exercisable, except under limited circumstances. Commencing on June 30, 2013, the warrants will be exercisable for shares of Conseco's common stock at the option of the holder at any time. The warrants expire on December 30, 2016. The closing of the common stock and warrant sale is subject to satisfaction of certain conditions and is expected to occur on the earliest closing date for the new convertible debentures that Conseco intends to privately offer.
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