Conseco Inc., whose bonds have been downgraded by every major rating agency in the past month as a result of the company's sharply lower-than-expected first-quarter earnings, may not expect to see those ratings increase any time soon.

The troubles of its financial subsidiary, Conseco Finance, also helped contribute to the downgrading, and the company has recently entered an agreement in which $1.5 billion in receivables from the finance unit would be purchased by Lehman Brothers Holdings Inc.

"We certainly view [the sale] as a positive event, but not a significant enough one to have any kind of impact on the ratings at this point," said Jon Reichert, a specialist at Standard & Poor's Ratings Services.

Tom Abruzzo, a senior director at Fitch IBCA, agreed. "It provides a real short term relief. I think the ultimate result of the ratings and where it goes is really going to depend on what goes on with thee sale of the business by Conseco. Ultimately, the ratings will depend more on the results of the sale."

While the transaction is expected to take place soon, a timetable has not been set. This sale has been said to help Conseco buy more time in selling its entire finance unit.

Lehman, who is also serving as Conseco's M&A advisor on the sale of Conseco Finance (formerly Green Tree Financial Corp.), will purchase $1.5 billion of consumer loans from the finance unit. The loans will be taken from the entire lending portfolio of Conseco Finance.

According to Bill Ahearn, spokesman for Lehman, the two companies have not discussed the exact make-up of the loans.

As for what Lehman will do with the loans once it has acquired them, it has been suggested that they will be sold into the market in one or more pieces, and could be packaged with other loans in its portfolio. "Our mortgage business buys whole loans and buys portfolios and we then sell or securitize them on a regular basis," said Ahearn.

The sale, of which $500 million has been earmarked to repay debt the finance unit owes its parent, will assist in the liquidity of Conseco - both at the holding company and finance company levels. "Included in that is lengthening the time we have to sell Conseco Finance," said Naveen Passey, spokesman for Conseco. "We do still anticipate to have a deal done or at least announced by third quarter as our previously stated goal."

While there has been "significant interest" in buyers for the finance unit, he could not comment on specific buyers. However, rumors have surfaced that GE Capital was interested in not only just buying Conseco Finance, but all of Conseco Inc.

In related news, Conseco was reported to be shopping a $500 million home-equity deal to investors last week. At press time, there was no word as to whether or not the securitization will take place.

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