Moody's: Shareholder pressure may lead Tenet to make drastic changes

Dallas-based Tenet Healthcare has sufficient liquidity and plenty of flexibility from a debt covenant perspective to give the company time to improve its operations or change its strategic direction before it needs to undertake material refinancing, according to a Moody's Investors Service report.

While Tenet's leverage is high, its next maturity is $500 million in March 2019. "We believe Tenet can repay this with a combination of cash, which will be increasing due to proceeds from anticipated asset sales, and use of its $1 billion revolving credit facility," said Moody's.

The company has no amortizing debt requiring periodic payments, and its bond indentures include no financial maintenance covenants or debt incurrence covenants, according to Moody's.

Moody's also noted Tenet's earnings have longer-term growth potential. Although Tenet's facilities are generally located in highly competitive urban areas, these areas have growing populations. Across all service areas, Moody's views Tenet's ambulatory surgery center business as having higher growth prospects than its acute care hospitals.

Despite financial flexibility, Tenet is facing increasing shareholder pressure, which Moody's said may lead the company to take more drastic measures, such as larger asset sales or even the sale of the entire company.

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