Healthcare services provider
Tenet Healthcare Corporation
) priced its previously announced private offering of senior
notes. The aggregate offering of $4.6 billion comprises of $1.8
billion aggregate principal amount of senior secured notes, due
2020 and $2.8 billion aggregate principal amount of senior
unsecured notes due 2022.
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The $1.8 billion senior secured notes carry an annual interest
rate of 6% while the $2.8 billion senior unsecured notes carry an
annual interest rate of 8.125%. Tenet Healthcare intends to use
the proceeds from the issuance to partly finance the company's
Vanguard Health Systems Inc.
) that is expected to culminate by the end of this year. Also
some of Vanguard's existing debts will be refinanced by the same.
With a total debt of $5.6 billion at the end of the second
quarter of 2013, Tenet Healthcare's debt level increased 19% year
over year. As of Jun 30, 2013, the debt-to-capital ratio
deteriorated 6 basis points (bps) year over year and 4 bps from
2012 year end. The current issuance of $4.6 billion is expected
to further deteriorate the debt-to-capital ratio going forward.
The new issuance would require Tenet Healthcare to pay an annual
interest of $109 million on the senior secured notes and $228.9
million on the senior unsecured notes. Nevertheless, the
company's strong operational performance generates enough funds
to service the debt uninterruptedly. Its interest expense, that
lowered 3.9% year over year in the second quarter, is expected to
rise with these new issuances.
Last week Moody's Investor Service, the credit rating agency of
) allotted debt ratings to this $4.6 billion note issuance.
Moody's rated the $1.8 billion notes to "Ba3" while the $2.8
billion notes were provided with a "B3" rating.
Tenet Healthcare currently carries a Zacks Rank #3 (Hold). Among
other healthcare companies,
Acadia Healthcare Company Inc.
) with a favorable Zacks Rank #2 (Buy) is worth considering.