West Penn Allegheny Health System to gain $55M with release of its bonds in Highmark deal
West Penn Allegheny Health System's deal to be acquired by health insurer Highmark Inc. is getting a little sweeter.
The financially struggling hospital network will get $55 million from a reserve fund when Highmark completes a deal to pay off investors holding about $710 million in West Penn Allegheny bonds.
“As part of the transaction with Highmark and the bondholders, a majority of the bondholders have agreed to release that security,” West Penn Allegheny spokeswoman Kelly Sorice said.
The fund was set up as a “rainy day fund” when West Penn Allegheny issued the bond debt in 2007 in case the hospital network missed debt service payments, which it never did, Sorice said.
The health system will use the money for ongoing renovation work at West Penn Hospital in Bloomfield and Forbes Regional Hospital in Monroeville, Sorice said. It may also repay construction loans taken out for those projects or for renovation work at other hospitals in the system, she said.
The extra money comes on top of $475 million that Highmark agreed to give the health system when the acquisition was announced in 2001. It's in addition to about $620 million Highmark will spend to buy West Penn Allegheny's bonds.
Highmark reached an agreement to buy the bonds this year at a discount of 87.5 cents on the dollar, a move it negotiated with West Penn Allegheny and bondholders to save the acquisition deal.
In September, West Penn Allegheny accused Highmark of breaking their deal by demanding it enter bankruptcy to reduce the debt. Highmark sued to prevent the hospital network from seeking a new buyer and won its case in Allegheny County Common Pleas Court.
Highmark plans to hold the bonds for three years and not charge the health system interest. Then West Penn Allegheny is expected to issue new bonds to repay the insurer.
The acquisition deal between Highmark and West Penn Allegheny still requires the approval of the state Insurance Department.
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.
- Sprint CEO weighs price cuts
- Hyundai recalls 883K Sonatas to fix gear shifters
- Chevron gains approval for $1B refinery project
- State to seek comments on drilling below Loyalsock State Forest
- Vigorous economy growing roots
- Fed offers a dual message on health of economy
- 11,000 Kawasaki vehicles recalled for injury risk
- Investors content with pace on stocks even in face of good news
- Lenders could move against Anchor Hocking as extension expires
- EPA failing to stop natural gas pipeline leaks, internal watchdog says
- Consol Energy posts $25 million loss despite gas gains