THC Prices Previously Announced Notes - Analyst Blog

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Healthcare services provider Tenet Healthcare Corporation ( THC ) 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.

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 acquisition of Vanguard Health Systems Inc. ( VHS ) 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 Moody's Corporation ( MCO ) 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. ( ACHC ) with a favorable Zacks Rank #2 (Buy) is worth considering.



ACADIA HEALTHCR (ACHC): Free Stock Analysis Report

MOODYS CORP (MCO): Free Stock Analysis Report

TENET HEALTH (THC): Free Stock Analysis Report

VANGUARD HEALTH (VHS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ACHC , MCO , THC , VHS

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