West Penn Allegheny violated bond terms in June
West Penn Allegheny Health System was in default of an agreement with bondholders at the end of June last year, the financially troubled hospital network said Thursday.
In a statement to bondholders, West Penn Allegheny said a ratio of cash to annual debt payments fell below the level required by investors holding more than $700 million of the system's bonds.
Spokesman Dan Laurent declined to comment.
The disclosure moves up by six months the point at which the system failed to meet at least one part of the agreement. West Penn Allegheny, which is in a deal to be acquired by health insurer Highmark Inc., failed to release an audited financial statement for the year ended June 30 by the end of December.
That could have led bondholders to force West Penn Allegheny into bankruptcy, but the hospital system and Highmark struck a deal with investors in January in which Highmark will buy the system's bonds at a discount of 87.5 cents on the dollar.
The bondholders agreed to hold off until May 1 on forcing repayment of the bonds. If West Penn Allegheny and Highmark don't complete the acquisition by the end of next month, bondholders would be free to demand payment, a move that would push the system into bankruptcy.
The deal is under review by the state Insurance Department, which has not said when it plans to make a ruling.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.