Highmark plans to hold onto the bonds until West Penn Allegheny returns to tax-exempt bond markets for financing to buy back the debt. West Penn Allegheny, also based in Pittsburg, has seen its speculative grade credit rating fall in recent months as its operating losses continue. The system lost $112.5 million on operations with revenue of $1.6 billion last year, which ended June 30, its unaudited financial records show.
Highmark has already poured $200 million into West Penn Allegheny in less than a year, and the system is set to receive $75 million when the deal closes and could see another $200 million in loans.
Highmark also said it would pay out $10 million to West Penn Allegheny each of the next five years “as part of its provider rate negotiations,” according to the latest filing.
The insurer also has committed $525 million to its plans for an integrated network, the Pennsylvania Insurance Department said in a letter acknowledging the latest filing. Highmark reached proposed agreements with Jefferson Regional Medical Center and St. Vincent Health System last year.
Highmark's latest plan “significantly changes the level of risk and the transaction is now materially different than what was presented” in November 2011, the insurance department said. The agency will accept public comment on Highmark's plans for 30 days.