A high-grade portfolio manager and a high-yield buy-side analyst see long-term value in the bonds of Tenet Healthcare, which have perked up slightly since the company named Trevor Fetter its new ceo earlier this month. The 7.375% notes of '13 were bid at 99 last Tuesday. Tenet has been dogged by government investigations into its billing practices, which caused a sell-off in the bonds earlier in the year.
Wayne Wilbanks, portfolio manager at Wilbanks, Smith & Thomas Asset Management in Norfolk, Va., says he has confidence in Fetter's ability to turn things around, and will likely buy the bonds if he sees a positive earnings surprise in the company's next conference call. "They have a dominant position in a number of cities, and there are a lot of barriers to entry: You don't just run out and open a hospital franchise." Though Wilbanks primarily owns investment-grade bonds, certain accounts allow the firm to hold double-B credits such as Tenet, and he sees an eventual upgrade for the company.
A buy-side analyst at an insurance company says his firm has traded in and out of Tenet's bonds, of which it currently owns a portion. He sees further headline risk in the name, as investigations continue, and lawsuits remain a risk. However, he says the company is strong from a balance sheet perspective and he would consider adding further exposure to the name if the bonds fall back a bit.