UPDATE: Conseco To Raise Funds In Stock Sales

   (Updates with Paulson & Co. comment.) 
 
   DOW JONES NEWSWIRES 
 

Conseco Inc. (CNO) plans to sell stock and debentures in an effort to shore up its beleaguered balance sheet.

The company moved quickly to issue the securities, even winning a New York Stock Exchange exception, as delaying the offerings to get stockholder approval would "seriously jeopardize the financial viability" of the company.

Conseco's shares rose 14% to $5.69 in after-hours trading. The stock has doubled in the past year.

The insurance holding company said it would register with the Securities and Exchange Commission to sell at least $200 million in shares in a public offering and also agreed to sell 16.4 million shares and warrants to purchase five million shares privately to investment funds managed by Paulson & Co. for $77.9 million. The warrants will have an exercise price of $6.50.

Additionally, Conseco said it plans to sell, in a private offer, up to $293 million in aggregate principal 2016 7% convertible senior debentures. The new debentures mostly won't be convertible prior to June 30, 2013.

Following the closing of the private sale of common stock, Paulson will hold a roughly 9.9% stake, including shares previously acquired in open-market transactions. Half of the net proceeds from the issuance of those shares will be used to repay debt under Conseco's credit agreement.

"We believe Conseco has a sound business model and with this financing, a much improved financial position," said John Paulson of Paulson & Co. "We have great confidence in Conseco's future direction, in [CEO] Jim Prieur, his management team and the board of directors."

Last quarter, the Indiana-based company swung to a profit as its investment losses shrank from a year earlier, having emerged from a tumultuous period in which it amended a credit pact after its auditor expressed doubts it could continue as a going concern.

-By Kathy Shwiff and John Kell, Dow Jones Newswires; 212-416-2357; [e-mail]