Tenet Healthcare Corp. is looking at various credit tools--including bank debt--after terminating its five-year, $800 million credit agreement and putting in place a $250 million one-year, letter of credit facility with Bank of America and Citigroup.
Tenet said last month that it would breach the covenants of its credit line due to a $395 million settlement for lawsuits related to unnecessary procedures performed at Redding Medical Center in California. "We took steps to cancel the line and said we would re-establish long-term credit in 2005," a Tenet spokesman said. "This is an interim step as we are currently working to establish a longer-term credit tool." He declined to comment on the form this would take, whether it would be unsecured or secured and which banks would lead it. The previous five-year bank line, which was maturing in 2006, had $222 million of letters of credit outstanding and was led by B of A and J.P. Morgan. "We have a great relationship with our original banking group," he stated.
The move has provoked a caustic response from Barbara Cappaert, an analyst with KDP Investment Advisors, who argues that the company has been quiet about the changes with the banks. "When the news is bad, they tend to do it in 8-Ks or late Friday night and they still have this credibility crunch they have to get through," the Vermont-based high-yield analyst stated. She said instead of reducing the credit line, investors were looking for a broader credit facility than the previous line and that the way this was disclosed makes her believe the new facility will be it for the future. "The reality is we have been overly transparent and have worked with Wall Street," responded the spokesman.