Paulson Buys 9.9% Of Insurer Conseco
After making repeated killings as a short (and being compensated for it), John Paulson is now actively looking for undervalued long opportunities (that are not misreported by the NYPost). Such seems to be the reasoning behind his latest disclosed involvement in insurer Conseco, where he is now the proud owner of 9.9% of the common stock after a $280 million investment.
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 Paulson & Co. Inc., on behalf of the several investment funds and
accounts managed by it (collectively, "Paulson"), 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
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.
Paulson's read on the situation: "Conseco has a sound business model and, with this
financing, a much improved financial position. We have great confidence in Conseco’s
future direction, in Jim Prieur, his management team and the
board of directors." Hopefully that is the case: the company was forced to file for chapter 11 last time around 7 years ago:
The insurer filed for bankruptcy court protection from
creditors in 2002 after Stephen Hilbert, Conseco’s founder and
former chief executive, bought Green Tree Financial Corp., a
mobile home lender. Conseco declared a $6.7 billion loss on that
investment after customers defaulted on loans.
Yet what Paulson sees in terms of upside value here is irrelevant: with the imitators now soundly on board, the stock is up 20% today.