Now that Pittsburgh-based West Penn Allegheny Health System is part of health insurer Highmark's new provider network, two rating agencies have weighed in on the health system's financial standing — with different results.
Moody's Investors Services upgraded West Penn's bond rating to "Caa2" from "Ca." Moody's analysts said the new rating is based on Highmark's cash tender offer to scoop up West Penn's debt, which allowed West Penn to avoid bankruptcy at the expense of the health system's bondholders and creditors. West Penn is not completely out of the woods yet — Moody's said it gave the health system a "developing" outlook as the new Allegheny Health Network system moves forward. In addition, Moody's downgraded the debt ratings of Highmark.
Standard & Poor's Ratings Services also adjusted its bond ratings for West Penn, but in the opposite direction. S&P downgraded West Penn's bonds from "CC" to "D" due to Highmark's tender offer. Both S&P considered the debt buyout a "distressed exchange," but S&P viewed it more as a negative because West Penn is still deeply in the red and because bondholders were forced to stomach losses.
West Penn lost $113 million in fiscal year 2012, and through the first six months of FY 2013, the health system's operating losses topped $60 million, according to Moody's. Acute-care discharges also continued their downward trend, and as of June 30, 2012, the system only had 62 days of cash on hand.
Moody's Investors Services upgraded West Penn's bond rating to "Caa2" from "Ca." Moody's analysts said the new rating is based on Highmark's cash tender offer to scoop up West Penn's debt, which allowed West Penn to avoid bankruptcy at the expense of the health system's bondholders and creditors. West Penn is not completely out of the woods yet — Moody's said it gave the health system a "developing" outlook as the new Allegheny Health Network system moves forward. In addition, Moody's downgraded the debt ratings of Highmark.
Standard & Poor's Ratings Services also adjusted its bond ratings for West Penn, but in the opposite direction. S&P downgraded West Penn's bonds from "CC" to "D" due to Highmark's tender offer. Both S&P considered the debt buyout a "distressed exchange," but S&P viewed it more as a negative because West Penn is still deeply in the red and because bondholders were forced to stomach losses.
West Penn lost $113 million in fiscal year 2012, and through the first six months of FY 2013, the health system's operating losses topped $60 million, according to Moody's. Acute-care discharges also continued their downward trend, and as of June 30, 2012, the system only had 62 days of cash on hand.
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