Tenet Hikes Notes Issue - Analyst Blog
November 07 2011 - 11:06AM
Zacks
On Friday, Tenet Healthcare Corporation (THC)
announced an increase in the issue size of its senior secured
notes, due 2018, to $900 million from $750 million, as announced
earlier the same day. The notes will be issued through private
placement and will carry an annual interest rate of 6.25%.
The proceeds of the issue is likely to be used for part
repayment of the principal, premium and interest on the 9% senior
secured notes due in 2015, which had an outstanding principal of
$714 million, as on September 30, 2011. Any surplus amount will be
used to repurchase other outstanding senior notes or for other
corporate purposes.
The new notes will be ranked equal to Tenet’s existing 9% senior
secured notes, 10% senior secured notes and 8.875% senior secured
notes and will be guaranteed and secured by Tenet’s capital and
ownership stock of the company’s certain subsidiaries.
Prior to the upsizing, Moody’s Investor Service assigned a debt
rating of “B1” to the notes, which is below investment grade.
Meanwhile Standard & Poor’s assigned a “BB-” issue-level
rating, with a recovery rating of “1”, which indicates a high
recovery rate for lenders in case of a default.
As the issue has not been registered by Tenet under the
Securities Act of 1933 or any state securities laws, the notes are
being issued only to qualified institutional buyers and people
living outside the U.S., who are not U.S. citizens. As per the
requirements of the Securities Act, the notes cannot be sold within
the U.S. or to any U.S. person, except pursuant to an
exemption.
We believe the issue will be beneficial to Tenet as the
subsequent repayment of 9% senior secured notes will significantly
reduce interest payments. Although total debt of the company will
also increase, the new debt will mature much after
the old notes do, thereby improving the company’s maturity
profile.
Tenet reported third-quarter income from continuing operations,
net of tax of $16 million or 4 cents per share, beating the Zacks
Consensus Estimate of one cent and operating loss of $14 million or
one cent per share in the prior-year quarter. The company competes
with HCA Inc. (HCA) and Community Health
Systems Inc. (CYH).
On Friday, the shares of Tenet closed at $4.86, down 3.19%, on
the New York Stock Exchange. The company carries a Zacks #3 Rank,
which implies a short-term Hold rating.
COMMNTY HLTH SY (CYH): Free Stock Analysis Report
HCA HOLDINGS (HCA): Free Stock Analysis Report
TENET HEALTH (THC): Free Stock Analysis Report
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