The healthcare services company,
Tenet Healthcare Corporation
), announced a private offering of senior notes to qualified
institutional buyers. The offering comprises $2.8 billion
aggregate principal amount of senior unsecured notes and $1.8
billion aggregate principal amount of senior secured notes.
Tenet Healthcare intends to use the proceeds from the issuance to
partly finance the company's acquisition of
Vanguard Health Systems Inc.
) that is expected to culminate by the end of this year. On Jun
24, 2013, Tenet announced this acquisition stating that it will
acquire this small competitor firm in an all-cash deal of $4.3
With a total debt of $5.6 billion at the end of the second
quarter of 2013, Tenet Healthcare's debt portfolio has increased
considerably (up 19% year over year). As of Jun 30, 2013, the
debt-to-capital ratio for the company was 0.86x, representing a
deterioration of 4 basis points (bps) and 6 bps from 0.82x at
year-end 2012 and 0.80x at Jun 30, 2012, respectively. The
current issuance of $4.6 billion is expected to further
deteriorate the debt-to-capital ratio, going forward.
Tenet Healthcare's interest expenses decreased 3.9% year over
year on notes payable in the second quarter of 2013.
Nevertheless, the new notes issued are expected to increase the
interest expense of the company, going forward. However, we
believe that the company's solid operational performance
generates enough funds to service the debt uninterruptedly.
Previously in May 2013, Tenet Healthcare offered to sell 4.375%
senior secured notes worth $1.05 billion due 2021, through
Tenet Healthcare carries a Zacks Rank #3 (Hold). Other
healthcare companies with a favorable Zacks Rank that are worth
HCA Holdings Inc.
Acadia Healthcare Companies Inc.
). Both the stocks carry a Zacks Rank #2 (Buy).
ACADIA HEALTHCR (ACHC): Free Stock Analysis
HCA HOLDINGS (HCA): Free Stock Analysis
TENET HEALTH (THC): Free Stock Analysis
VANGUARD HEALTH (VHS): Free Stock Analysis
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