Bondholders have told West Penn Allegheny Health System to file an audited financial statement within 30 days to avoid violation of a bond covenant.
Master trustee UMB Bank of Kansas City, Mo., sent a notice on Thursday to the teetering Pittsburgh-based health system. A copy of the notice is available on the Municipal Securities Rulemaking Board’s EMMA website.
West Penn’s roughly $726 million of speculative-grade debt makes it one of the largest junk-level issuers in the municipal marketplace. The Allegheny County Hospital Development Authority issued the Series A bonds in June 2007.
Last week, West Penn officials acknowledged that an audited financial statement for the fiscal year ending 2012 was not available, “but the system intends to continue to work with its independent auditors to finalize the same.”
In the financial statement West Penn released at the end of 2011, auditing firm KPMG LLP said deficits and recurring losses raised doubts about West Penn’s ability to survive.
Standard & Poor’s rates the bonds CC, while Moody’s Investors Service and Fitch Ratings assign Ca and CCC ratings, respectively. All three rating agencies have downgraded the bonds over the past three months.
West Penn is in talks with Blue Cross Blue Shield insurer Highmark Inc., also of Pittsburgh, about a $475 million affiliation agreement. West Penn broke off talks in late September when new Highmark chief executive William Winkenwerder insisted that West Penn file for bankruptcy, but talks resumed two months later after the Allegheny County Court of Common Pleas ruled that West Penn could not talk with other suitors.
West Penn is the second-largest health care provider in western Pennsylvania, behind the University of Pittsburgh Medical Center.