Funeral concern Stewart Enterprises, Inc. may finance through securitization going forward, even as brutal competition in the funeral industry has begun to thin the herd.

The Metairie, La.-based company may take advantage of the recent demise of Loewen Group Inc., the firm formerly known as the "world leader in death care," which filed for Chapter 11 last week.

A source close to Stewart said the firm had looked at securitizing recently, and viewed the financing method as an attractive possibility, though this person could not provide details on timing or size of a deal.

Funeral home asset-backeds contain revenue streams from "pre-need" cemetary sales, where people take care of their own affairs well before death occurs through installment payments, "like an auto loan," said a source in the sector. Stewart had not securitized in the past, the source said, because "the financing did not fit its needs at the time."

Market watchers pegged Loewen's failure on an overly aggressive acquisition and financing strategy. The firm became overwhelmed with debt after conducting bidding wars for cemetery properties over the years with rivals Stewart and Houston-based Service Corp. International.

The final blow may have come when it became apparent that paying down the $300 million in asset-backed notes which are scheduled to come due Oct. 1 would be an impossibility. The bankruptcy filing gives the firm a chance to renegotiate the terms of those notes. Though Loewen officials said the bankruptcy filing represents a restructuring versus a liquidation, others at the firm admitted a renegotiation on outstanding ABS would be impossible without concessions in the form of further asset sales.

A committee of creditors has been formed to determine who gets what under the pending restructuring, which may start with the sale of the firm's stand-alone cemeteries. The filing has so far attracted "vulture" funds, corporate bondholders and the asset-backed noteholders to the creditor's table. The ABS folk are stuck with attempting to collect the highest payouts.

The Loewen Group had fast become one of the world's largest publicly-held funeral service and cemetery corporations in terms of revenues and assets. In its heyday the firm owned and operated more than 1,100 funeral homes and 400 cemeteries in the U.S., Canada and the United Kingdom. In 1996, it was worth $4.3 billion. Last week, the company had a market capitalization of $40 million. - SK

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