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Highmark to Pay $300M in Loans to Acquire West Penn Allegheny in Pittsburgh

A large portion of the $475 million that Pittsburgh-based Highmark will pay for West Penn Allegheny Health System, also in Pittsburgh, is comprised of loans, according to a Pittsburgh Tribune-Review report.

Terms of the acquisition were recently revealed in the organizations' Form A filing with the Pennsylvania Insurance Department. Highmark will pay $475 million in full to acquire the health system, with $300 million in the form of loans, $100 million in cash and $75 million for scholarships for medical students at a new medical school being established by West Penn and Temple University in Philadelphia.

Highmark will also give $1 million to its new parent company, which is tentatively named UPE and was created to oversee the payor and West Penn. The UPE name is expected to change for marketing purposes, but the title has not yet been determined. The new UPE parent organization will apply to the IRS for 501c3 tax-exempt status and organize its board of directors and officers from Highmark's board and management.

West Penn has $1 billion in debt, made up of approximately $750 million in outstanding bonds and about $250 million in pension obligations. Some experts cited in the report said they are curious how West Penn will pay the loans back. Others say Highmark insurance customers should be concerned that their premiums are going into a potentially risky investment, according to the report.

Related Articles on Highmark and West Penn Allegheny Health System:

West Penn Drops Highmark from Lawsuit; Details of Acquisition Revealed
Highmark's Down Payment Saved Pittsburgh's West Penn Allegheny From Closure
Pittsburgh's Highmark, West Penn Allegheny Close to Definitive Agreement

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