West Penn-Highmark Transaction Costs to Surpass $1.6B
Pennsylvania Insurance Department (pdf) filing yesterday.
Stephen Johnson, deputy insurance commissioner of the PA Insurance Department, drafted a document outlining the current progress of the West Penn-Highmark deal, which he said has "continued to evolve and grow in terms of its scope and complexity, as well as the magnitude of the associated financial obligations."
When Highmark originally proposed to purchase West Penn in November 2011, the price stood at $475 million. However, last week, Highmark and West Penn agreed to deal in which Highmark would buy West Penn's debt, paying bondholders 87.5 cents on the dollar. In total, Highmark will be paying off $635 million of West Penn's $726 million in bonds, while bondholders absorb the losses.
The new debt agreement combined with the original price tag and other "additional and amended financial commitments" has pushed the cost of the transaction to at least $1.6 billion, Mr. Johnson wrote. In addition, the $1.6 billion does not include payment for West Penn's pension obligations, which stood at $279 million at the end of its 2012 fiscal year.
The PA Insurance Department plans on reviewing the transaction further and has opened a public comment period that will last at least 30 days. Officials also expect to release financial and economic reports on the West Penn-Highmark deal within the next two-and-a-half months.
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