TEXT-S&P says Tenet Healthcare issue rtgs unchanged after add-ons

Fri Apr 27, 2012 5:02pm EDT

April 27 - Standard & Poor's Ratings Services said today that its ratings
on Tenet Healthcare Corp.'s senior secured and senior unsecured debt
remain unchanged following a $141 million add-on to the company's 6.25% senior
secured notes due 2018, and a $150 million add-on to its 8% senior notes due
2020. The issue-level rating on the senior secured notes is 'BB-' (two notches
above our 'B' corporate credit rating on the company) with a recovery rating of
'1', indicating our expectation of very high (90% to 100%) recovery for
noteholders in the event of a payment default. The issue-level rating on the
senior notes is 'CCC+' (two notches lower than the corporate credit rating) with
a recovery rating of '6', indicating our expectation of negligible (0% to 10%)
recovery for noteholders in the event of a payment default. These add-ons would
bring the total size of this senior secured issue to $1.04 billion and the size
of this senior note to $750 million. The company plans to use proceeds from the
notes to repay about $299 million of its outstanding 7% mandatory convertible 	
preferred stock. Since we already consider the preferred stock as debt 	
according to our criteria, these add-ons do not change the amount of debt we 	
consider in our analysis.	
	
The corporate credit rating on Tenet is 'B' and the rating outlook is stable. 	
The rating reflects our assessment of Tenet's financial risk profile as 	
"aggressive" and its business risk profile as "weak."	
	
Our assessment of Tenet's financial risk profile as aggressive reflects debt 	
to EBITDA of about 4.6x and our view that Tenet's limited upside earnings 	
potential and weak cash flow may limit debt reduction. Further contributing to 	
this expectation is the company's share repurchase activity in the absence of 	
any appreciable cash flow which suggests it may not be committed to further 	
improvement its financial risk profile.	
	
Our assessment of Tenet's business risk profile as weak reflects its 	
relatively sizable portfolio of 50 hospitals but also considers the risks of 	
uncertain reimbursement, significant uncompensated care, relatively weak 	
patient volume trends, and concentration in certain markets, many of which are 	
competitive. At the same time, we believe weak economic conditions will 	
continue to exert pressure on Tenet's payor mix, limiting its ability to 	
improve its EBITDA margins much beyond the current mid-12% area. (For the 	
latest complete corporate credit rating rationale, see Standard & Poor's 	
summary analysis on Tenet, published Jan. 18, 2012, on RatingsDirect.)	
	
RELATED CRITERIA AND RESEARCH	
     -- Methodology And Assumptions: Liquidity Descriptors For Global 	
Corporate Issuers, Sept. 28, 2011	
     -- 2008 Corporate Criteria: Analytical Methodology,April 15, 2008	
	
RATINGS LIST	
	
Tenet Healthcare Corp.	
 Corporate Credit Rating             B/Stable/--	
 Senior Secured	
  $1.04 bil 6.25% nts due 2018       BB-	
   Recovery Rating                   1	
 Senior Unsecured	
  $750 mil 8% senior notes due 2020  CCC+	
   Recovery Rating                   6
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