Tenet Healthcare Corp. recently closed a $2 billion credit that it arranged itself, relying on banks for advise and help in rounding out the syndicate. Stephen Farber, senior v.p. of finance, explained that the company chose to skip an underwriter partly because it was cheaper. Also, Tenet had developed a relationship with several banks and believed it could get a deal on its own.
More than 20 banks are in the syndicate, but Farber says several banks shut the door on Tenet, saying they had stopped financing healthcare names in the wake of HMO reimbursement cutbacks. "We felt confident from our strong relationships with banks all over the Street that we'd be able to arrange commitments with key banks," Farber said, adding that the risk paid off. "By the time we had our first bank meeting, more than 75 percent had been committed." He says the company even had to cut back on some of the allocations and ended up increasing its facility to $2 billion from the original goal of $1.75 billion.
Farber, a former banker, strongly advocates relationship banking and believes it can make the difference between a deal getting done and struggling in syndication. "The relationship is everything. It helps in getting deals done in a tough market. It's easy to get a deal in an easy market," he said.
J.P. Morgan Chase and Bank of America are lead arrangers on the deal, which did not go out to bid. Farber explained that while the company essentially acted as an underwriter for its deal, the lead arrangers also played critical roles by helping to work out the term sheet and syndicate. They each loaned $200 million. Farber says Tenet had worked with both names in the past. "J.P. Morgan had led bank deals of ours, and with the merger [to Chase], we felt they were getting bigger and stronger. Bank of America has also been with us for a long time and is also getting stronger, which has made them better positioned," he explained. "We went into the deal knowing what we wanted to do. It was just an issue of having a trusted group of advisors helping to execute it," he said. Farber says Tenet is always open to developing a relationship with additional banks.