By Hilary Russ
Jan 15 (Reuters) - A troubled Pittsburgh healthcare system
is expected to announce as soon as Wednesday that it has reached
a deal to avoid a $1.6 billion bankruptcy, which would cut its
debt and leave its assets in the hands of insurer Highmark Inc,
according to a source familiar with the matter.
Under the tentative agreement, Highmark would offer cash
payments of about 87.5 cents on the dollar, plus accrued
interest, to West Penn Allegheny Health System's bond holders,
the source said. The system has about $710 million of
outstanding debt, which was issued in 2007.
Terms of the deal are still provisional and could change. A
call is scheduled for bondholders on Thursday, according to a
West Penn and Highmark, one of the 10 biggest U.S. health
insurers, did not immediately return calls for comments.
A major regional healthcare system, West Penn grew out of
the remains of another healthcare system that went bankrupt in
All three major U.S. credit rating agencies have cut West
Penn's credit rating deeper into junk territory since November,
after its $475 million merger alliance with Highmark fell apart
and landed in court under the specter of a possible bankruptcy
Highmark sued to stop West Penn from seeking alternate
suitors that could inject cash into the revenue-shedding system.
A state judge agreed with Highmark, and the two sides resumed
negotiations, along with bondholders.
West Penn and Highmark came under pressure to ink a deal
after bondholders notified the hospital system on Jan. 3 that it
would be in technical default in 30 days if it didn't provide an
audited financial statement for fiscal 2012, which ended June
Follow us on Twitter @ReutersLegal | Like us on Facebook