Recently, Moody's Investor Service, the credit rating agency
) allotted debt ratings to
Tenet Healthcare Inc.
) latest senior note issuance. The $1.8 billion senior secured
notes were assigned a "Ba3" rating while the $2.8 billion senior
unsecured notes were provided with a "B3" rating.
Moody's had put Tenet's ratings on review after the latter
entered into a definitive agreement to acquire
Vanguard Health Systems Inc.
) in Jun 2013. The present rating action is a reflection of this.
Additionally, Moody's affirmed the existing B1 Corporate Family
Rating and B1-PD Probability of Default Rating . All the
abovementioned ratings carry a stable outlook. The B1 Corporate
Family Rating affirmation reflects an expected improvement in
Tenet's credit metrics due to the synergies and benefits from the
Affordable Care Act (ACA) implementation. The thorough
utilization of debts for acquisitions and excess capital
deployment are also reflected in the ratings. The stable outlook
came on the back of an expected improvement in the pro forma
credit metrics of Tenet.
At the same time Moody's downgraded Tenet's Speculative Grade
Liquidity Rating from SGL-2 to SGL-3. This downgrade came on the
back of expected cash requirement at the time of maturity of the
$474 million of senior unsecured notes in the first quarter of
2015. The downgrade also reflects the sudden maturity of Tenet's
credit revolver in the latter half of 2014 in case a part of
these notes are not refinanced or repaid in a timely manner.
Moreover, Moody's also warns that considerable capital
expenditures might pressurize Tenet's liquidity in the near term.
A near term upgrade in the ratings is unlikely as Moody's expects
credit metrics to improve throughout 2014. However, lower
leverage levels (below 4x) can lead to a potential upgrade. A
failure to improve operating performance, trouble in integrating
Vanguard in its operations or higher leverage levels could invite
Rating affirmations or upgrades from credit rating agencies
play an important part in retaining investor confidence in the
stock as well as maintaining creditworthiness in the market. The
ratings affirmed by Moody's are expected to help the company to
help it write more business going forward. On the contrary, the
downgrade in Tenet's Speculative Grade Liquidity Rating is
expected to mar investor confidence on the stock to some extent.
The debt ratings assigned is expected to help Tenet procure debt
smoothly going forward.
Tenet Healthcare carries a Zacks Rank #3 (Hold). Another
healthcare company with a favorable Zacks Rank #2 (Buy) that is
worth considering is
Acadia Healthcare Company Inc.
ACADIA HEALTHCR (ACHC): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
TENET HEALTH (THC): Free Stock Analysis
VANGUARD HEALTH (VHS): Free Stock Analysis
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