Fitch revises Tenet's outlook to negative over USPI deal

Fitch Ratings has affirmed Dallas-based Tenet Healthcare's ratings and revised the system's outlook to negative from stable.

The rating action follows Tenet's announcement that it will combine its ambulatory and imaging centers with those of United Surgical Partners International, which is owned by Welsh, Carson, Anderson & Stowe, to create a joint venture. The for-profit hospital operator said it will raise about $2.4 billion of new long-term debt to fund the transaction.

Through the USPI joint venture, Tenet will become the largest operator of ambulatory surgery and imaging centers in the nation, which was a positive aspect of the deal that Fitch considered for the rating affirmation.

Fitch also considered the challenges of the deal for the rating affirmation, including how the transaction is initially unfavorable to Tenet's balance sheet.

The revision of Tenet's outlook to negative "illustrates that a downgrade could result if Fitch does not expect Tenet's cash generation to be sufficient to fund the bulk of cash outflows associated with future acquisitions, both of remaining USPI interests from Welsh Carson and otherwise," according to the report.

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