New York, September 25, 2009 -- Moody's Investors Service changed the rating outlook of Tenet Healthcare Corp. (Tenet) to positive from stable. Concurrently, Moody's affirmed Tenet's B3 Corporate Family and Probability of Default ratings.
The positive outlook reflects the reduction of refinancing risk given the company's recent capital transactions. Further, we believe that recent improvements in leverage levels that were accelerated with the repayment of debt from the proceeds of the convertible preferred stock can be maintained and will likely continue to modestly improve based on further EBITDA growth. Continued EBITDA growth is expected from ongoing initiatives at the operational level that have bolstered results in the most recent quarters and caused the company to raise its full year guidance.
Moody's also downgraded the rating on Tenet's senior secured notes due 2015, 2018 and 2019 to B2 (LGD3, 35%) from B1 (LGD3, 32%). The downgrade of the rating on the senior secured notes reflects the reduction in the
layer of first loss absorption provided by the unsecured notes. Approximately $300 million of the 2015 unsecured notes were repurchased with the proceeds of the convertible preferred issuance. This change is in accordance with the application of Moody's Loss Given Default Methodology.
For further details, refer to Moody's Credit Opinion on Tenet Healthcare Corporation.
Following is a summary of Moody's rating actions.
Ratings affirmed/LGD assessments revised:
$800 million senior secured revolving credit facility due 2011, to Ba3 (LGD1, 3%) from Ba3 (LGD1, 2%) 6 3/8% senior notes due 2011, to Caa2 (LGD5, 84%) from Caa2 (LGD5, 82%)
6.5% senior notes due 2012, to Caa2 (LGD5, 84%) from Caa2 (LGD5, 82%)
7 3/8% senior notes due 2013, to Caa2 (LGD5, 84%) from Caa2 (LGD5, 82%)
9 7/8% senior notes due 2014, to Caa2 (LGD5, 84%) from Caa2 (LGD5, 82%)
9 1/4% senior notes due 2015, to Caa2 (LGD5, 84%) from Caa2 (LGD5, 82%)
6 7/8% senior notes due 2031, to Caa2 (LGD5, 84%) from Caa2 (LGD5, 82%)
Corporate Family Rating, B3
Probability of Default Rating, B3
Speculative Grade Liquidity Rating, SGL-2
Ratings downgraded:
9.0% senior secured notes due 2015, to B2 (LGD3, 35%) from B1 (LGD3, 32%)
10.0% senior secured notes due 2018, to B2 (LGD3, 35%) from B1 (LGD3, 32%)
8.875% senior secured notes due 2019, to B2 (LGD3, 35%) from B1 (LGD3, 32%)
Moody's last rating action was on June 18, 2009, when the senior secured notes maturing 2015 and 2018 were downgraded to B1 (LGD3, 32%) from Ba3 (LGD2, 23%) and the senior unsecured notes were downgraded to Caa2 (LGD5, 82%) from Caa1 (LGD5, 75%). This concluded the review of the ratings of the company's notes initiated on June 1, 2009. All other ratings were affirmed.
The principal methodology used in rating Tenet was Moody's Global For-Profit Hospital Industry Methodology published in September 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
Tenet Healthcare Corporation (Tenet) is one of the largest for-profit hospital operators by revenues. The company is headquartered in Dallas, Texas and is expected to continue to operate 50 hospitals in 12 states (excluding one hospital not yet divested and included in discontinued operations at June 30, 2009) and a critical access hospital. Tenet generated revenue from continuing hospital operations of approximately $8.9 billion for the twelve months ended June 30, 2009.
New York
Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Dean Diaz
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653