Tenet Healthcare Corp. is coming back to the market for a bank loan after abandoning the financial strategy for letters of credit in 2004. Citigroup and Bank of America are leading a new $800 million revolver for the hospital and healthcare services operator, expected to launch mid-October, according to a company spokesman, who referred further questions to a company release. Pricing on the revolver could not be determined.
The new five-year receivables-backed revolver will be used to provide the company with adequate liquidity to meet all of its anticipated future operating needs. The facility is secured by patient accounts receivables and can be increased by $200 million depending on the amount of eligible receivables outstanding, according to the release.
Dallas, Texas-based Tenet left the bank loan market in 2004 when it terminated its previous unused $800 million revolver in favor of a letter of credit facility. The letters of credit will be rolled into the new $800 million facility, freeing up about $262 million of restricted cash used to support the LCs. Tenet chose to return to the revolving facility as a way of relaxing operating covenants and lowering annual facility costs, as well as improve liquidity, according to the release.
In a research report, KDP Investment Advisors recommended investors sell Tenet's 6.375% '11 and 9.875% '14 notes because it thinks Tenet's bonds trade too tight as compared to HCA's unsecured bonds, which it expects will widen when the healthcare giant brings its second-lien bonds to the market. Standard & Poor's lowered Tenet's senior unsecured notes to CCC+ from B, based on the large amount of debt sitting above them. Moody's Investors Service also downgraded the company's notes to Caa1 from B3 and assigned a Ba3 rating to the new proposed facility.