Moody's cuts Tenet Healthcare senior debt to B1

Moody's Investors Service said it lowered the debt ratings of Tenet Healthcare Corp., including the company's senior unsecured notes, senior implied rating and issuer rating to B1 from Ba3 and the subordinated notes to B3 from B2.

The outlook is negative.

Moody's said the rating downgrade is prompted by further deterioration in operating cash flow and the potential for material calls on cash over the near to intermediate term.

Moody's believes that new operating issues and recently disclosed potential claims on cash result in a higher level of uncertainty regarding Tenet's ability to fully fund its cash needs with current sources of liquidity.

Newly disclosed operating challenges - some of which are sector-wide in nature - include higher bad debt expense, more restrictive nurse staffing ratios in California, and tougher stances taken by health benefits payors as remaining contracts are negotiated.

In addition, several recent developments, including an appellate court's ruling on an employee contract case and an IRS tax deficiency report, may require sizeable near-term cash outlays. Moody's said it believes that these potential cash needs, even prior to considering pending government investigations, may materially reduce current cash resources, which are expected to total about $650 million by year end.

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