Nov 13 Moody's Investors Service on Tuesday
downgraded West Penn Allegheny Health System's bond rating
deeper into the junk category, citing a high likelihood of a
restructuring or bankruptcy filing.
The downgrade to Ca with a negative outlook from Caa1
affects $726 million of fixed-rate bonds the Pennsylvania-based
health system sold through the Allegheny County Hospital
"The rating also incorporates the likelihood of less than
full recovery of the bonds in the event of bankruptcy and in the
absence of an asset sale," Moody's said in a statement.
The credit rating agency warned about a downgrade in
September after West Penn terminated an agreement with health
insurer Highmark Inc. Subsequent litigation led to a
recent ruling that rejected the health system's claim that
Highmark breached the pact and granted the insurer's request for
a preliminary injunction against West Penn, according to
"We believe this ruling is a negative credit development for
WPAHS because it prevents WPAHS from seeking other capital
partners," Moody's said.
A major regional healthcare system, West Penn has been
struggling financially for years. Its $475 million deal with
Highmark, one of the 10 biggest U.S. health insurers, would have
given it a cash infusion and granted Highmark control of the
But after Highmark's former chief executive was fired in
April, the new CEO, William Winkenwerder, insisted that West
Penn file for bankruptcy to reduce its massive debt load before
Highmark would close the transaction, according to West Penn,
which terminated the deal on Sept. 28.
But the health system and the insurer issued a statement on
Monday saying they met together and with bondholders to address
West Penn's financial condition in order to secure approval of
their affiliation agreement with the Pennsylvania Insurance
"Highmark and WPAHS continue to believe that an affiliation
between them is in the best interests of both organizations and
of the greater community," the statement said.
In October, Fitch Ratings cut the health system's rating to
CCC from B-plus.