Moody's downgrades West Penn Allegheny on likelihood of bankruptcy
Moody's Investors Service on Tuesday downgraded West Penn Allegheny Health System's credit rating further into junk status on its expectation that Highmark Inc. will take the troubled health system into bankruptcy.
Moody's maintained its negative outlook on the region's second-largest hospital system as it dropped the system's rating a step to “Ca,” down from “Caa.” The “Ca” rating, which is one step above Moody's lowest rating, reflect's West Penn Allegheny's “extremely weak credit-worthiness.”
The downgrade gives West Penn Allegheny the lowest rating among the 462 health care organizations that are rated by Moody's.
“The Ca rating reflects the severity of the financial status of the system and our belief that there is a high likelihood of a restructuring or bankruptcy filing,” Moody's said in a report.
The report goes on to state that a court ruling issued Friday preventing West Penn from talking to other possible buyers “is a negative credit development.”
West Penn has about $750 million in bond debt and $280 million in unfunded pension liability. On Monday, it restarted talks with Highmark, the state's largest health insurance company, to resurrect Highmark's proposed $475 million acquisition of the system, which operates five hospitals in the Pittsburgh region.
Highmark and West Penn officials said they have talked with West Penn's bondholders and plan more discussions.
West Penn tried to get out of the deal with Highmark, accusing the insurer of demanding it reduce debt through bankruptcy. Highmark sued, and Allegheny County Common Pleas Court Judge Christine Ward granted an injunction to keep the deal together.
“We are not surprised by Moody's rating action,” West Penn spokeswoman Kelly Sorice said. “Nonetheless, WPAHS continues to believe that an affiliation with Highmark is in the best interests of both organizations and of the greater community.”
Highmark spokesman Michael Weinstein declined to comment.
In late October, Fitch Ratings downgraded West Penn's credit rating. Standard & Poor's, which is reviewing its rating on the health system, has not taken action.
The deal is awaiting approval by the state Insurance Department, which has expressed “significant concerns” about West Penn's ability to repay its debt.
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.