Tenet Prices Senior Notes - Analyst Blog
January 25 2013 - 9:20AM
Zacks
Tenet Healthcare Corporation (THC) recently
decided to issue $850 million 4.5% senior secured notes with
maturity scheduled in 2021.
Subsequently, credit rating agency Standard & Poor’s Rating
Services allotted an issue-level rating at “B+” and a recovery
rating of “2”. Additionally Fitch Ratings also assigned Tenet’s
senior secured notes due 2021 a “BB/RR1” rating with a stable
outlook.
The proceeds from the issuance will be deployed to finance the
purchase of Tenet’s 10% senior secured notes worth $174 million due
2018. The remaining proceeds will be utilized to buyback
outstanding senior notes of the company privately or publicly as
well as to engage in deleveraging activities.
As of Sep 30, 2012, the debt-to-capital ratio for the company was
0.79x which represented an increase of 4 percentage points from
0.75x at 2011 end. With the issuance of the $850 million debt, the
debt-to-capital ratio is expected to increase further 3 percentage
points to 0.82x.
The new issuance would require Tenet to pay an annual interest of
$38.3 million. Nevertheless, the company’s solid operational
performance generates enough funds to service the debt
uninterruptedly. Its interest expense in the third quarter shot up
74.6% year over year.
Last December, another healthcare service provider HCA
Holdings Inc. (HCA) also decided to offer $1.0 billion
aggregate principal amount of senior notes. The proceeds from the
issuance were intended to be distributed to its shareholders and
optionholders.
Tenet is expected to release its fourth-quarter and full year 2012
earnings results on Feb 25. The Zacks Consensus Estimates for the
fourth quarter is currently pegged at 70 cents translating into
year-over-year improvement of 74.3%. Earnings for full year 2012
are expected to be $1.96 per share down 9.2% year over year.
Tenet carries a Zacks Rank #3 (Hold). Other healthcare service
companies like Acadia Healthcare Company, Inc.
(ACHC) and Mednax, Inc. (MD) carry favorable Zacks
Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) respectively and are
worth noting.
ACADIA HEALTHCR (ACHC): Free Stock Analysis Report
HCA HOLDINGS (HCA): Free Stock Analysis Report
MEDNAX INC (MD): Free Stock Analysis Report
TENET HEALTH (THC): Free Stock Analysis Report
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