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Earlier this week, Tenet Healthcare Corporation (THC - Analyst Report) announced the private offering of 4.75% senior secured notes due 2020, worth $500 million and 6.75% senior unsecured notes due 2020, worth $300 million. The offer is projected to close on October 16, 2012, subject to the fulfillment of customary closing conditions.

Tenet will use the proceeds from the issuance for buying back its outstanding 7.375% senior notes due 2013, worth $216 million. The company has already announced a tender offer for the cash purchase, which is scheduled to expire on October 29, 2012.

Holders of the senior notes who validly tender their notes before the specified early tender time on October 15, 2012, will receive an early tender premium of $30 per $1,000 principal value of the notes. This takes their total consideration to $1,019.67 per $1,000 principal value. They will also receive any accrued and unpaid interest till the date when the initial settlement is made, which is projected to be on October 16, 2012.

Further, holders of the senior notes, who validly tender their notes between the early tender time and the expiry of the tender offer, will not receive the early tender premium. Thus, their consideration will be of $989.67 per $1,000 principal value of notes. However, they will also receive the accrued and unpaid interest till the final settlement date, which will likely be October 30, 2012.

Remaining proceeds from the private offer of senior notes will be used for repurchasing Tenet’s outstanding senior notes and for funding general corporate needs such as financing planned acquisitions and repayment of debt and drawings under the senior secured revolving credit facility.

Fitch has assigned a ‘BB/RR1’ rating to the senior secured notes and ‘B-/RR5’ rating to the senior unsecured notes. Further, the rating agency revised the rating of the outstanding senior unsecured notes to ‘B-/RR5’ from ‘B/RR4.’ The outlook on these ratings is stable.

Meanwhile, according to Reuters, Moody’s Corp. (MCO - Analyst Report) has rated the secured and unsecured noted at ‘b1’ and ‘caa1’, respectively. Standard & Poor’s Rating Services (S&P) has also assigned a ‘B+” issuer level rating to the senior secured notes and ‘CCC+’ to the senior unsecured notes, as per Reuters. Further, this rating agency downgraded the issuer level rating on Tenet’s senior secured term debt to ‘B+’ from ‘BB-.‘

The senior notes offer is a part of Tenet’s financial and strategic plans, announced on October 1, 2012, comprising acquisitions, share repurchases, debt repayment and a reverse stock split. With these plans, the company is aiming at enhancing business growth and optimizing capital structure, thereby boosting shareholder value.

Tenet Healthcare, which competes with HCA Inc. (HCA - Snapshot Report) and Community Health Systems Inc. (CYH - Snapshot Report), carries a Zacks #2 Rank, which translates into a short-term Buy rating. We maintain a long-term Outperform recommendation on the stock.

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