Highmark Inc. said it plans to buy West Penn Allegheny Health System’s debt sold in 2007 at 87.5 cents on the dollar, an agreement that steers the Pittsburgh-based hospital system away from seeking bankruptcy protection.
The plan will allow West Penn to restructure its debt outside of court and pushes forward a potential affiliation agreement with Highmark, one of the nation’s 10 biggest health-insurance companies.
“Throughout this process we all worked hard to develop a financial plan for the short and long-term financial stability of the health system,” William Winkenwerder, president of Pittsburgh-based Highmark, said in a press release today.
Bondholders representing about 76 percent of the 2007A bonds agreed to the restructuring, according to a material event filing on the Municipal Securities Rulemaking Board’s website. The debt totals about $710 million, data compiled by Bloomberg show. It was the biggest tax-exempt junk issue since at least 1990.
The restructuring price is higher than where the West Penn debt has been trading in the secondary market. Tax-exempt bonds due in November 2040 traded Jan. 14 with an average price of 65.94 cents on the dollar, Bloomberg data show.
The company’s revenue deal was initially rated Ba2 by Moody’s Investors Service, two levels below investment grade. The debt, which doesn’t have bond insurance, is now eight steps lower at Ca.
UMB Bank NA, trustee for the debt, will hold a conference call with bondholders Jan. 17, according to a separate filing with the MSRB.
Aaron Billger, a Highmark spokesman, didn’t immediately respond to a phone call and e-mail seeking comment. West Penn referred media inquiries to Highmark.