Moody’s might cut Tenet

Moody's Investors Service said it placed the ratings of Tenet Healthcare Corp. under review for downgrade, including the B1 corporate family rating and B1-PD probability of default rating.

The action follows the announcement that Tenet signed a definitive agreement to enter into a joint venture with Welsh, Carson, Anderson & Stowe to combine the ambulatory surgery center businesses of Tenet and United Surgical Partners International. Tenet also announced the acquisition of Aspen Healthcare Ltd., which operates nine private hospitals and clinics in the United Kingdom.

In order to finance the transactions, Tenet will issue $2.4 billion of new debt, including the refinancing of about $1.5 billion of United Surgical debt. The transactions are expected to close in the third quarter of 2015.

"Tenet's joint venture transaction will further delay the expected reduction in leverage considered in our confirmation of the B1 corporate family rating following the company's acquisition of Vanguard Health Systems in the fourth quarter of 2013,” Moody’s vice president and senior credit officer Dean Diaz said in a news release.

"While the transactions evidence an ongoing appetite for increasing scale and diversifying across different care settings, Tenet will have an improved payor mix and geographic diversity, as well as less reliance on revenue sources from the more capital intensive and lower margin acute care hospitals following the transactions."

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