CNO Financial Group Inc., the life insurer that counts John Paulson’s hedge fund as its largest investor, reached a four-year high after announcing a recapitalization plan that may boost per-share profit.
CNO gained 5.5 percent to close at $9.45 in New York, the highest since July 2008. The Carmel, Indiana-based firm has advanced 50 percent this year.
The insurer is seeking $950 million of loans and bonds to repay debt and cut borrowing costs, CNO said yesterday in a statement. As part of a repurchase of convertible debentures, CNO’s diluted share count will fall by 36.4 million. The reduction would have increased earnings per share by 9 percent as of June 30, according to the statement.
“The deal should optimize the company’s debt leverage,” Randy Binner, an analyst at FBR Capital Markets, wrote in a research note yesterday. “CNO is a compelling value play in our opinion with an in-progress capital management story.”
CNO plans to obtain senior secured credit consisting of a $400 million, six-year term loan and a $250 million portion that matures in four years, the firm said in yesterday’s statement. CNO also plans to sell $250 million of notes due in 2020 and is seeking a $50 million, three-year revolving credit line.
Proceeds and cash will be used to repay $224 million on a senior secured credit agreement, repurchase as much as $275 million in senior notes due in 2018, buy back about $200 million of its convertible notes due in 2016 and pay expenses related to the transactions, the firm said. CNO will take a $161 million charge in the third quarter.