West Penn Allegheny Health soars with Highmark deal
Bond investors betting on the takeover of West Penn Allegheny Health System, whose 2007 tax-exempt junk deal is the biggest for a U.S. hospital in more than two decades, are benefiting from a four-year rally in such debt.
In the deal that steered West Penn away from bankruptcy, Highmark offered to buy the hospital system's bonds at 87.5 cents on the dollar. Bondholders sold it $604.2 million worth, or 85 percent.
Since the April 29 purchase, investors who held onto the obligations have seen prices rise as much as 14 percent, data compiled by Bloomberg show.
Some bondholders are wagering that the merger will bolster West Penn's finances, said Lyle Fitterer, a managing director at Wells Capital Management. Amid the longest rally in junk-grade hospital munis in six years, he kept nearly $7 million of West Penn debt maturing Nov. 15.
The acquisition and the purchases from the majority of bondholders “gave us comfort to just basically hang on to the bonds with the view that we would get paid par when they mature,” said Fitterer, who helps oversee about $31 billion of munis from Menomonee Falls, Wis.
West Penn, which admitted almost 56,000 patients in fiscal 2012, borrowed $752 million in 2007 to refinance debt. It was the largest tax-exempt hospital deal rated below investment grade, according to Bloomberg data starting in 1990.
Bondholders kept $105.5 million of the West Penn securities, with $70.2 million maturing in November 2040, Bloomberg data show. Bonds maturing Nov. 15 traded May 1 at 100 cents, 14 percent more than Highmark's tender price, Bloomberg data show. That's still down from the initial 2007 pricing level of 101.6 cents.
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.
- Balancing gas pipeline expansion, environmental unease a problem in Pa.
- Coal gathering opens with dour assessment, political vitriol
- Stocks slip on China growth jitters
- Symposiums to spotlight Pittsburgh’s role as an energy powerhouse
- More companies embrace exchanges to curb health care costs
- Hospitals turn to technology to tear down language barriers with patients
- Pa. considers $300,000 plan to clean polluted site in Kennedy
- Range Resources to pay $4.15M fine, close old gas drilling impoundments
- Mylan CEO Bresch sets sights on growth
- Congress: Safety agency mishandled GM recall
- Shell touts Utica gas wells in northern Pa.