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Tenet Healthcare (THC) to Issue Senior Notes Worth $750 Million

HUM WCG MGLN THC

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Tenet Healthcare Corp. (THC - Free Report) recently announced its decision to sell aggregate principal amount of newly issued senior secured second lien notes worth $750 million through a private placement. The company also established the pricing of the senior secured second lien notes, due 2022. The $750 million aggregate principal amount of the notes, has been upsized from $500 million and will carry an interest rate of 7.50% per annum.

The notes will be secured on a second lien priority basis on the capital stock. These notes will be senior to the company’s unsecured debt and  subordinated to the  first-lien secured debt.

The net proceeds of the issuance of these notes will be primarily used for the payment of fees and expenses. The remainder, if any, will be used to repay outstanding debt under Tenet Healthcare’s senior secured revolving credit facility and for other general corporate purposes.

Tenet Healthcare is a highly levered company and it regularly refinances debt through tender offers and exchange offers. It also repurchases debt through privately negotiated transactions and open market repurchases. As of Sep 30, 2016, the company had a total debt of $14.3 billion as against total shareholders’ equity of $528 million. The debt level remained almost same year over year. The company deploys substantial part of its cash flow to pay the interests on its debts and thus, is left with limited funds to utilize for its operations, growth initiatives or capital expenditures. Previous to this pricing, the company offered to sell $500 million aggregate principal amount of senior secured notes through a private placement in Jun 2016.

TENET HEALTH Price

 

Zacks Rank and Stocks to Consider

Tenet Healthcare presently carries Zacks Rank #3 (Hold).

Investors can also look at some better-ranked stocks from the medical sector like WellCare Health Plans Inc. (WCG - Free Report) , Magellan Health Inc. (MGLN - Free Report) and Humana Inc. (HUM - Free Report) .

Magellan delivered positive surprise in three of the last four quarters with an average beat of  42.58%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

WellCare delivered beat through out last four quarters with an average of 40.01%. the company also has a Zacks Rank #1.

Humana delivered positive surprise in three of the last four quarters with an average beat of 1.94%. It carries a Zacks Rank #2 (Buy).

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