Moody's rates Tenet notes B1

Moody's Investors Service said it assigned a B1 (LGD 3, 39%) rating to Tenet Healthcare Corp.'s $850 million of senior secured notes due 2018. The company's other ratings are unchanged including its B2 corporate family rating, B2-PD probability of default rating, SGL-2 speculative grade liquidity rating, the B1 (LGD 3, 39%) ratings assigned to its existing senior secured notes and the Caa1 (LGD 5, 87%) ratings assigned to its senior notes. The outlook remains positive.

The note proceeds will be used to fund a tender offer for the company's 10% senior secured notes due 2018 and for general corporate purposes.

Tenet's B2 corporate family rating is constrained by Moody's expectation of modest free cash flow and continued high geographic concentration. Furthermore, the agency said 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.

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

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