Sample Case Study on Conseco Bankruptcy

Conseco Bankruptcy

The Conseco bankruptcy is considered to be one of the largest bankruptcy cases to have occurred in the United States. In fact, it is considered as the third largest in history. Conseco Inc was one of the best loan and insurance companies in the US before its collapse that has been largely blamed on accrued bad loans and ambitious expansion. The company ran operations in health insurance, life insurance, annuity among several other insurance products. The enormous growth of Conseco Inc was mainly as a result of the numerous acquisitions that it had made. These propelled the company to success such that by 2001, it had accumulated more than $5.5 billion annual premium and over $24 billion investments related to insurance.

Trouble began brewing in Conseco Inc in 1999. The stock price of CNC had started taking a downward trend since the company’s acquisition of CFC. In order to counter this, the company was forced to change its accounting strategy in CFC. Most investors had earlier on raised concerns over inflated earnings. Contrary to the expectation of Conseco, the counter strategy only resulted into more drops in the earnings in the third quarter. The situation was even worsened further by the increased indebtedness of the company.

As the company ushered in the Millennium, trouble kept brewing and it faced even more problems that would eventually lead to default. In August 2002, CNC made an announcement that it had not been able to make principal payments and interest on a wide range of senior notes and securities. This led to default on the instruments, thus, affecting other facilities too. The company had temporarily acquired waivers from creditors as restructuring efforts. During this time, stock had been squeezed to $1 leading to a halt in trading.

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In 2002, Conseco’s stock had been delisted from the NYSE, a clear indication that the company was on the way to its knees. In the face of this fall, the company expressed an interest in selling Conseco Finance to some investors to help in servicing some of its accrued debts. However, this did not do much towards savaging the already collapsing company.

Conseco made quite a number of acquisitions in the 1990s with the hope that such activities would propel it to success. However, one significant purchase of the Green Tree Financial dealt the company a blow that would send it to bankruptcy. Green Tree Financial was a company that mainly dealt with financing mobile home sales. This led the company to accumulate debts of over $6.5 billion.

Having struggled through the years without any success in cutting down the amount of accrued debts, Conseco filed for Chapter 11 in 2002. During this time, the actual value of the company was estimated at $61.4 billion. One year later, Conseco’s assets were auctioned at a cost of about $1 billion. In the same year, the company was able to bounce back to business with its main focus on the insurance business.

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