West Penn Allegheny extends talks with bondholders
By Alex Nixon and Luis Fábregas
Published: Wednesday, Jan. 9, 2013, 12:58 p.m.
Highmark Inc. and West Penn Allegheny Health System reached a tentative agreement with bondholders to prevent Pittsburgh's second-largest hospital network from entering into bankruptcy, sources close to the negotiations told the Tribune-Review.
Though not finalized, the agreement to reduce part of the $726 million owed to bondholders would allow the struggling health system to avoid the financial chaos of a Chapter 11 bankruptcy protection proceeding, according to two sources with knowledge of the agreement. They were not authorized to speak publicly about it.
A reduction in West Penn Allegheny's debt could also be key to Highmark's chances of securing approval from the state Insurance Department to acquire the health system.
The size of the debt reduction to which bondholders tentatively agreed is unclear. Representatives of Highmark, West Penn Allegheny, the bondholders and the Insurance Department met in Harrisburg on Wednesday to discuss the deal, the sources said.
Department spokeswoman Melissa Fox declined to confirm the meeting occurred.
“Highmark and West Penn Allegheny Health System have been in active discussions with each other, and with the bondholders of WPAHS. These discussions have been constructive,” Highmark spokesman Aaron Billger wrote in an emailed statement. He declined to comment further.
The state's largest health insurance company, Highmark is trying to acquire West Penn Allegheny and start a regional, integrated health system to compete with UPMC, the region's largest hospital system.
West Penn Allegheny on Wednesday extended agreements with Highmark and bondholders that delay any demand for immediate payment of debt and prevent public discussion of negotiations.
“In connection with West Penn Allegheny Health System's (WPAHS) proposed affiliation with Highmark Inc., these parties and certain WPAHS bondholders previously entered into standstill and nondisclosure agreements, which were due to expire on Jan. 9, 2013,” the health system stated in a statement posted online.
Hospital system spokeswoman Kelly Sorice would say only: “The parties are continuing discussions and have agreed to extend the term of those agreements.”
The Trib could not reach officials with the bondholders' trustee, UMB Bank of Kansas City.
West Penn Allegheny has bled money for years. In October, it released unaudited financial results for the fiscal year ended June 30, 2011, showing a loss from operations of $112.5 million, more than double the previous year's operating loss.
Last week, West Penn Allegheny's bondholders issued a notice of default when the health system failed to meet a deadline to release audited results for that year. The notice gives West Penn Allegheny 30 days to release statements or the bondholders can demand immediate payment of debt, a move that likely would force the health system to file for bankruptcy protection.
A plan to reduce West Penn Allegheny's debt, which Highmark produced in September, suggested asking bondholders to accept a reduction of $290 million to $399 million. The plan would unload West Penn Allegheny's pensions onto the federal Pension Benefit Guaranty Corp., which would eliminate $280 million in unfunded liability. Highmark would convert $100 million it loaned the health system into grants.
If successful, that deal could reduce West Penn Allegheny's $1.4 billion debt by $779 million, or more than half.
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.
- Obamacare dramatically increases costs for some small businesses
- Hearing scheduled on Western Pa. landowners’ rights to block drilling
- Marcellus shale driller Noble Energy Inc. sinks roots into Pittsburgh
- Minorities crucial to filling Marcellus shale gas drilling jobs
- Profit falls at American Eagle Outfitters on sales decline, charges
- Job postings up in January
- Dick’s Sporting Goods business brisk while American Eagle feels chill in profits
- Men’s Wearhouse, Jos. A. Bank agree to merger
- California mulls rules for ‘driverless cars’
- ‘Fresher, different, lot more fun’ guide changes at Kings Family Restaurants
- Stocks end slightly lower for a second day