PITTSBURGH Nov 2 An adviser to ailing West Penn
Allegheny Health System urged a Pennsylvania judge on Friday to
make a quick decision about whether West Penn can escape a
soured $475 million merger with insurer Highmark Inc.
West Penn -- which is likely to go bankrupt without another
investor -- argued that it should be allowed to negotiate with
new suitors. Highmark is seeking an injunction that
would keep the regional healthcare provider tied to its original
"We're running out of time right now," West Penn's adviser
and former board chairman David McClenahan testified. "We lose
money every day. If there isn't going to be a deal with
Highmark, we need to know it and we need to act on it."
Allegheny County Judge Christine Ward presided over four
days of testimony spread over the last two weeks in a Pittsburgh
courtroom. She won't rule on whether to block West Penn until
after both sides submit additional information on Wednesday.
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. West Penn officials
said they never got that message from their meetings with
In court on Friday, McClenahan said there were alternatives
to a bankruptcy.
Currently, West Penn pays a 5 percent interest rate on its
debt of roughly $800 million, McLenahan said. If it merges with
Highmark, the combined entity could easily afford the $40
million payment for its debt service, he said.
If Ward stops West Penn from searching for other
takers, McClenahan said the struggling health system could sink
deeper under water.
Highmark CEO William Winkenwerder told the court last week
that voiding the merger would raise medical costs in the region
because of a lack of competition with the behemoth UPMC health
"At the end of the day, it's extremely important to this
community," Winkenwerder testified.