S&P trims Tenet notes, rates new notes BB-

S&P said it rated Tenet Healthcare Corp.’s first-lien senior notes BB- with a recovery rating of 1.

The 1 recovery rating indicates an expectation for very high (90%-100%, rounded estimate: 95%) recovery for lenders in the event of a payment default.

“The company is issuing the notes to provide extra liquidity while it manages through a substantial decline in patient volume related to the intentional deferral of elective procedures to help conserve resources for the Covid-19 crisis,” the agency said in a news release.

“The transaction will slightly increase leverage.”

The issuer credit rating on Tenet remains B with a stable outlook.

At the same time, the agency lowered the issue-level rating on Tenet's secured second-lien notes to CCC+ from B- and revised the recovery rating to 6 (rounded estimate: 0%) from 5 (rounded estimate: 10%).

“The revision is due to lower recovery prospects for the second-lien debt resulting from the increase in first-lien debt, and the expectation the company will succeed with its intention to increase the size of its ABL to $2 billion from $1.5 billion,” S&P noted.

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