We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Tenet Healthcare (THC) Gets Rating Actions From Moody's
Read MoreHide Full Article
Credit rating agency Moody’s Investors Service recently confirmed the Tenet Healthcare Corporation’s (THC - Free Report) B2 Corporate Family Rating, B2-PD Probability of Default Rating and Caa1 senior unsecured ratings. The credit rating giant downgraded the company’s current senior secured first and second lien ratings to B1 from Ba3 and allocated a B1 rating to the company's new senior secured first lien notes due 2025. However, outlook of the ratings remains stable.
Rationale Behind the Rating
The decline in rating for the senior secured first and second lien debts mirrors a move over time toward a greater amount of secured debt pertaining to unsecured debt in Tenet Healthcare's capital composition. It also underlines several actions taken by the company over the past year to enhance its Asset Back Lending capacity.
Fund derived from the new senior secured first lien notes will boost the company’s liquidity as it prepares itself to cope with the overwhelming numbers of coronavirus-infected patients.
The company is also seeking an amendment to hike its borrowing capacity by $500 million, bringing the total facility to $2 billion, which in turn, would strengthen its liquidity level.
Moody’s affirmation of the B2 CFR rating reflects the company’s solid liquidity. It also shows that the company is likely to gain from the recently-signed CARES Act for helping the hard-hit American economy following the COVID-19 outbreak.
Tenet Healthcare’s B2 Corporate Family Rating is mainly constrained by its high financial leverage and also the recent coronavirus spread in the United States. The pandemic required hospitals to postpone their elective procedures to accommodate any potential surge in the COVID-19-infected admissions, which is why Moody’s expects the health emergency to put pressure on the company’s earnings.
Tenet Healthcare's ambulatory surgery and revenue cycle management businesses bring in operational diversity and will benefit from longer-term trends that favor services being done on an outpatient basis during the benign durations. The company expects to complete the spin-off of Conifer, which will likely aid in deleveraging.
Moody’s stable outlook corroborates the company’s impressive liquidity and its ability to bounce back once the isolation measures are lifted.
Factors That Can Impact the Ratings
The company could witness a downgrade in ratings if it faces operational challenges or fails to achieve its targeted cost savings. Also, the Conifer divestiture without debt repayment or the execution of share buybacks or making shareholder distributions could lead to a downgrade.
The rating could also face a downgrade if debt/EBITDA is expected to be sustained above 6.5 times or the company’s liquidity faces a headwind. Notably, the ratings could be upgraded if the company gains traction from its recent costs and operating initiatives. It could also be upgraded if the company’s cash flow and interest coverage improve. Another reason behind an upgrade is when debt/EBITDA is sustained below 5.5 times.
The stock performance looks paler in comparison to other companies in the same space, such as Community Health Systems, Inc. (CYH - Free Report) , Universal Health Services, Inc. (UHS - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) , which have returned 23.6%, 36% and 37.9%, respectively, in the same time frame.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
Image: Bigstock
Tenet Healthcare (THC) Gets Rating Actions From Moody's
Credit rating agency Moody’s Investors Service recently confirmed the Tenet Healthcare Corporation’s (THC - Free Report) B2 Corporate Family Rating, B2-PD Probability of Default Rating and Caa1 senior unsecured ratings. The credit rating giant downgraded the company’s current senior secured first and second lien ratings to B1 from Ba3 and allocated a B1 rating to the company's new senior secured first lien notes due 2025. However, outlook of the ratings remains stable.
Rationale Behind the Rating
The decline in rating for the senior secured first and second lien debts mirrors a move over time toward a greater amount of secured debt pertaining to unsecured debt in Tenet Healthcare's capital composition. It also underlines several actions taken by the company over the past year to enhance its Asset Back Lending capacity.
Fund derived from the new senior secured first lien notes will boost the company’s liquidity as it prepares itself to cope with the overwhelming numbers of coronavirus-infected patients.
The company is also seeking an amendment to hike its borrowing capacity by $500 million, bringing the total facility to $2 billion, which in turn, would strengthen its liquidity level.
Moody’s affirmation of the B2 CFR rating reflects the company’s solid liquidity. It also shows that the company is likely to gain from the recently-signed CARES Act for helping the hard-hit American economy following the COVID-19 outbreak.
Tenet Healthcare’s B2 Corporate Family Rating is mainly constrained by its high financial leverage and also the recent coronavirus spread in the United States. The pandemic required hospitals to postpone their elective procedures to accommodate any potential surge in the COVID-19-infected admissions, which is why Moody’s expects the health emergency to put pressure on the company’s earnings.
Tenet Healthcare's ambulatory surgery and revenue cycle management businesses bring in operational diversity and will benefit from longer-term trends that favor services being done on an outpatient basis during the benign durations. The company expects to complete the spin-off of Conifer, which will likely aid in deleveraging.
Moody’s stable outlook corroborates the company’s impressive liquidity and its ability to bounce back once the isolation measures are lifted.
Factors That Can Impact the Ratings
The company could witness a downgrade in ratings if it faces operational challenges or fails to achieve its targeted cost savings. Also, the Conifer divestiture without debt repayment or the execution of share buybacks or making shareholder distributions could lead to a downgrade.
The rating could also face a downgrade if debt/EBITDA is expected to be sustained above 6.5 times or the company’s liquidity faces a headwind.
Notably, the ratings could be upgraded if the company gains traction from its recent costs and operating initiatives. It could also be upgraded if the company’s cash flow and interest coverage improve. Another reason behind an upgrade is when debt/EBITDA is sustained below 5.5 times.
Zacks Rank and Price Performance
Shares of the Zacks Rank #3 (Hold) company have lost 61.2%, wider than its industry's decline of 41.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock performance looks paler in comparison to other companies in the same space, such as Community Health Systems, Inc. (CYH - Free Report) , Universal Health Services, Inc. (UHS - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) , which have returned 23.6%, 36% and 37.9%, respectively, in the same time frame.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>