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Rating Action:

Moody's rates Tenet's proposed sr. secured notes B1; outlook remains positive

Global Credit Research - 22 Jan 2013

NOTE: On January 25, 2013, the press release was revised as follows: In the first paragraph, first sentence, the maturity on the notes has been corrected to 2021. Revised release follows.

New York, January 22, 2013 -- Moody's Investors Service assigned a B1 (LGD 3, 39%) rating to Tenet Healthcare Corporation's (Tenet) offering of $850 million of senior secured notes due 2021. Moody's existing ratings of the company, including the B2 Corporate Family Rating and B2-PD Probability of Default Rating, remain unchanged. The rating outlook remains positive.

Moody's understands that the proceeds of the offerings will be used to fund the tender for the 10.0% senior secured notes due 2018 resulting in an improved maturity profile and interest cost savings. Any proceeds remaining after funding the tender for the $714 million of outstanding 10% senior secured notes will be used for general corporate purposes. Moody's will withdraw the ratings on the 10% senior secured notes upon the successful completion of the tender offer.

Following is a summary of Moody's rating actions.

Ratings assigned:

$850 million senior secured notes due 2021, B1 (LGD 3, 39%)

Ratings unchanged:

6.25% senior secured notes due 2018, B1 (LGD 3, 39%)

10.0% senior secured notes due 2018, B1 (LGD 3, 39%) (to be withdrawn following the completion of the announced tender offer)

8.875% senior secured notes due 2019, B1 (LGD 3, 39%)

4.75% senior secured notes due 2020, B1 (LGD 3, 39%)

7.375% senior notes due 2013, Caa1 (LGD 5, 87%)

9.875% senior notes due 2014, Caa1 (LGD 5, 87%)

9.25% senior notes due 2015, Caa1 (LGD 5, 87%)

6.75% senior notes due 2020, Caa1 (LGD 5, 87%)

8.0% senior notes due 2020, Caa1 (LGD 5, 87%)

6.875% senior notes due 2031, Caa1 (LGD 5, 87%)

Corporate Family Rating, B2

Probability of Default Rating, B2-PD

Speculative Grade Liquidity Rating, SGL-2

RATINGS RATIONALE

Tenet's B2 Corporate Family Rating is constrained by Moody's expectation of modest free cash flow and continued high geographic concentration. Furthermore, industry challenges like high bad debt expense, weak volume trends and changes in mix as commercial volumes decline, will likely challenge organic growth. However, the rating also incorporates Moody's expectation that the company will continue to see improvements in operating performance, driven by cost savings initiatives and benefits from capital investment.

The positive outlook reflects Moody's expectation that EBITDA growth will continue and result in gradually improving free cash flow and reduced leverage.

Moody's could upgrade the rating if the company is able to effectively manage growth of the business such that leverage remains at or below 4.5 times while earnings growth continues to result in improving credit metrics.

Moody's could downgrade the rating if a decline in operating performance results in an expectation that debt to EBITDA will rise above 5.5 times or if free cash flow, prior to discretionary reinvestment in the business, is expected to be negative. Furthermore, a significant debt financed acquisition or share repurchase could result in a downgrade of the ratings.

For further details, refer to Moody's Credit Opinion for Tenet Healthcare Corporation on moodys.com.

Tenet, headquartered in Dallas, Texas, is one of the largest for-profit hospital operators by revenues. At September 30, 2012 the company's subsidiaries operated 49 hospitals as well as 112 free-standing and provider-based outpatient centers. The company also offers other services, including revenue cycle management, health care information management and patient communications services. Tenet generated revenue of approximately $9.9 billion for the twelve months ended September 30, 2012 before consideration of the provision for doubtful accounts.

The principal methodology used in this rating was the Global Healthcare Service Providers published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dean Diaz
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates Tenet's proposed sr. secured notes B1; outlook remains positive
No Related Data.

 

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