WPAHS warned: Default at hand
West Penn Allegheny Health System on Thursday received an official warning from its bondholders, letting the system know it could be in bankruptcy court by the end of the month.
The trustee for bondholders, who are owed about $726 million, issued a notice of default because West Penn Allegheny failed to release audited financial statements last week, health system spokeswoman Kelly Sorice said.
“The notice informed WPAHS that it has failed to furnish audited financial statements for the year ended June 30, 2012, and if we do not remedy this failure within 30 days following receipt of this notice, an event of default will then exist,” Sorice said.
The health system has said it intends to file its audited statements in the next 30 days.
But in the event of a default, the trustee can demand immediate payment of the bond debt, Sorice said.
Accelerating payment of millions of dollars usually leads to a bankruptcy filing because the indebted organization rarely possesses the cash to immediately pay back their lenders, said Stephen Foreman, associate professor of health care administration at Robert Morris University.
“Your only remedy is to go get protection from the bankruptcy court,” he said.
Officials with the trustee, UMB Bank of Kansas City could not be reached for comment.
Foreman predicted West Penn Allegheny and Highmark Inc., which is trying to acquire the health system, will announce a deal with bondholders to reduce the debt this month, before a default occurs.
“I would not think those bondholders would want to go through a bankruptcy proceeding if they can avoid it,” he said.
Highmark spokesman Aaron Billger said officials with the state's largest health insurance company are working on both short-term and long-term plans to restore the health of West Penn Allegheny.
“We're aware of the default notice, and addressing the financial condition of West Penn Allegheny is a top priority,” Billger said.
On Dec. 28, West Penn Allegheny, Pittsburgh's second-largest health system with five hospitals and about 11,000 employees, did not release audited financial statements, missing a deadline established in its agreement with bondholders, who bought about $750 million in bonds in 2007.
Sorice said the financial reports were incomplete because its outside auditors, KPMG, had not issued an opinion on them.
A no opinion means the auditor has found substantial problems with the hospital system's finances, such as not having enough cash to meet provisions of its bond agreement.
West Penn Allegheny and Highmark officials have discussed a deal with some bondholders to reduce the debt the health system owes, officials have said. And Highmark CEO William Winkenwerder has predicted a deal would be finalized this month.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or firstname.lastname@example.org.
Add Alex Nixon to your Google+ circles.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Developer hopes to make Allegheny Center a tech hub
- Murray Energy expects to lay off as many as 1,800 more
- Pa. sees widespread job gains; jobless rate holds at 5.3%
- BNY Mellon promotes executive
- Home sales slipped in April on tight supply, high prices
- BNY Mellon to pay $180M to end foreign-exchange lawsuit
- McDonald’s CEO ‘proud’ of pay hike
- CVS to enter elder-care market with acquisition of drug distributor Omnicare
- Market inches further into record territory as oil price jump boosts energy sector
- Minorities lose out on lending, survey reports
- IRS refunds $10M to tax preparers who paid to take competency test