Magazine article American Banker

Stocks: Conseco Chief Sees Calmer Seas Ahead

Magazine article American Banker

Stocks: Conseco Chief Sees Calmer Seas Ahead

Article excerpt

Conseco Inc.'s chief executive was in New York on Wednesday reassuring investors that the worst is over now that his company has taken a half- billion-dollar writedown in connection with the purchase of Green Tree Financial Corp.

The "surprises ... are going to be on the positive side, not the negative one," said Stephen Hilbert. The Carmel, Ind., company's stock has been battered since its April 6 announcement that it planned to pay a hefty premium for Green Tree, a manufactured-housing lender that suffered from accounting problems.

The insurance giant's stock slid from a 52-week high of $57.75 the day before the acquisition announcement, to $43.187 on June 16. When the deal closed June 30, Conseco said it would take a $498 million writedown, in part because of a revaluation of Green Tree.

But now that the company has taken its "dose of salt," it is ready to show real revenue, Mr. Hilbert said. Mr. Hilbert predicts "solid numbers" in the third and fourth quarters, with the stock "closer to $70 than $50" by yearend.

Companies are increasingly taking such charges when they make acquisitions, said Yun Jae Chung, a banking analyst at Bessemer Trust Co., New York, who criticized the companies for destroying shareholder value. "Sometimes it's one to two times what they expect the cost savings to be," she said.

Mr. Hilbert said he delayed announcing the charge because he needed to do a full analysis of the loans before announcing the charge.

"If we had written down the assets the day of the announcement, this would have been old news," Mr. Hilbert said. Other lenders, like Household International Inc. …

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