Court hearing over West Penn Allegheny investor talks extended

PITTSBURGH Fri Oct 26, 2012 7:43pm EDT

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PITTSBURGH (Reuters) - A Pennsylvania judge on Friday extended a key court hearing in a dispute between troubled West Penn Allegheny Health System and insurer Highmark Inc. HIGHM.UL over a soured $475 million merger agreement.

Allegheny County Judge Christine Ward presided over two days of testimony on Thursday and Friday but still needed more time next week to hear witnesses and evidence in Highmark's bid to block West Penn from talking to other potential investors.

Ward will continue the hearing next Thursday.

West Penn says Highmark, under a new CEO, began insisting that it file for bankruptcy to reduce its debt load before Highmark would consummate the deal.

Highmark has already provided $225 million to help keep struggling West Penn afloat. West Penn issued $737 million of municipal bonds in 2007.

Each has now accused the other of breaching their agreement.

State insurance regulators suggested in a letter to Highmark that they were more likely to sign off on the merger if West Penn first filed for bankruptcy to reduce its debt, according to evidence Highmark presented at the hearing.

(Reporting By Drew Singer; Editing by Bob Burgdorfer)

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