Earlier this week, Tenet Healthcare Corporation (THC - Analyst Report) completed the previously-announced private offering of senior notes. Consequently, the company issued $850 million worth of 4.5% senior secured notes, scheduled to mature in 2021.
Tenet Healthcare will use the amount raised to repurchase its outstanding 10% senior secured notes due 2018. Residual proceeds will be used by the company to buy back other outstanding senior secured notes, repay debts and drawings made under the senior secured credit facility, acquisition and for other corporate expenses.
Tenet Healthcare announced a tender offer for the repurchase of the 10% senior secured notes in January and received valid tenders for $644.5 million worth of notes till the consent payment deadline on Feb 4, 2013. Holders of these notes will receive the principal amount along with accrued and unpaid interest and a consent payment of $30 per share. This amounts to a receipt of $1164.50 for every $1000 principal amount held.
Holders of the 10% senior notes who submit a valid tender after the consent payment ate but prior to the expiry of the tender offer will not receive the consent payment. As a result, they will receive only $1134.50 for every $1000 principal amount held. The final settlement for the tender offer is expected on Feb 20, 2013.
The new issuance would require Tenet Healthcare to pay an annual interest of $38.3 million. Nevertheless, the company’s solid operational performance generates enough funds to service the debt uninterruptedly. Its interest expense in the third quarter shot up 74.6% year over year.
Tenet Healthcare is expected to release its fourth-quarter and full year 2012 earnings results on Feb 25. The company currently carries a Zacks Rank #2 (Buy).
Other healthcare service companies like Acadia Healthcare Company, Inc. (ACHC - Analyst Report) – Zacks Rank #1 (Strong Buy) – and Coventry Health Care Inc. and Molina Inc. (MOH - Analyst Report) – Zacks Rank #2 (Buy) – are worth considering.