Moody's rates Tenet notes Ba3

Moody's Investors Service said it assigned a Ba3 (LGD 3) rating to Tenet Healthcare Corp.'s new senior secured second-lien notes due 2027.

There is no change to Tenet's existing B2 corporate family rating, B2-PD probability of default rating, Ba3 first-lien senior secured rating, Ba3 second-lien senior secured rating and Caa1 unsecured rating.

Moody's also noted that there is no change to the stable outlook or the speculative grade liquidity rating of SGL-2.

The proceeds from the new $750 million of senior secured second-lien notes will be used in combination with cash to repay its March 2019 unsecured notes at maturity and finance the redemption of its February 2020 unsecured notes, the agency said.

The proposed notes will be secured by a second priority pledge of the capital stock of Tenet's domestic subsidiaries and benefit from guarantees provided by domestic hospital subsidiaries, Moody's said.

The rating also benefits from of a considerable amount of unsecured and unguaranteed debt that would absorb losses ahead of the secured debt, the agency said.

Also, Moody's said it expects considerable changes to Tenet's capital structure over the next 12 months given the need to refinance $2.3 billion of first-lien secured notes due 2020 as well as the potential for changes in the capital structure.

The ratings are constrained by the company's very high financial leverage with adjusted debt-to-EBITDA of 6.6x, the agency said, along with industry-wide headwinds and weak volume trends.

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