Fitch Places West Penn Allegheny Health System (PA) Bonds on Rating Watch Evolving

NEW YORK–(BUSINESS WIRE)–Fitch Ratings has placed on Rating Watch Evolving the ‘BB-‘ rating on

approximately $747.7 million series 2007A health system revenue bonds

issued by Allegheny County Hospital Development Authority for the

benefit of West Penn Allegheny Health System (WPAHS).

https://twitter.com/BeWellBoston/status/419241797400137728

The Rating Watch Evolving indicates that the rating may be raised,

lowered or affirmed. On June 28, the health insurer Highmark Inc.

(Highmark) announced that it intends to enter into an affiliation with

WPAHS as a first step leading to a potential acquisition. Both of the

not-for-profit boards voted on June 27 to approve the general terms of

the transaction. As part of the agreement, Highmark will immediately

provide a $50 million grant to WPAHS to support its ongoing operations.

Highmark has further committed to provide up to $475 million over the

next four years, including $75 million toward medical education for

WPAHS affiliated medical schools. It was announced that Dr. Christopher

Olivia, the health system’s president and CEO, will be leaving his role

as of June 28 and will be replaced by Dianne Dismukes, who had been the

system’s vice president of hospital operations. Fitch believes positive

rating movement (or Outlook revision) could occur depending on the

specifics of the agreement. Prior to this rating action, WPAHS’s bonds

had a Negative Outlook.

WPAHS continues to amass significant operating losses in the current

fiscal year as it implements the downsizing of its system and is facing

large pension liabilities. The failure of the transaction to go forward

has the potential for further downward rating pressure. Fitch will take

further rating action when the details of the definitive agreement are

available.

For more detail on WPAHS see Fitch’s press release ‘Fitch Affirms West

Penn Allegheny Health (Pennsylvania) at ‘BB-‘; Maintains Negative

Outlook, dated Jan. 14, 2011, available on the Fitch website at ‘www.fitchratings.com‘.

Additional information is available at ‘www.fitchratings.com

Applicable Criteria and Related Research:

‘Revenue-Supported Rating Criteria’, dated Oct. 8, 2010;

‘Nonprofit Hospitals and Health Systems Rating Criteria’, dated Dec. 29,

2009.

For information on Build America Bonds, visit ‘www.fitchratings.com/BABs‘.

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130

Nonprofit Hospitals and Health Systems Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493186

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