Tenet Raises $1 Billion in Private Note Sale

Tenet Healthcare Corp., the target of federal investigations including a probe of how it billed Medicare, said Tuesday that it had improved its financial flexibility by raising $1 billion from lenders and reducing debts maturing between now and 2007.

Santa Barbara-based Tenet, the second-biggest U.S. hospital operator, said it issued $1 billion of 10-year unsecured notes paying annual interest of 9.88%. The sale, in a private placement, was boosted from a previously announced $500 million.

The notes, the proceeds of which will be used to repay outstanding debt with earlier maturities and also for general corporate purposes, were priced to yield 10.25%, Tenet said. The notes yield 5.57 percentage points more than U.S. Treasuries with a comparable maturity.

With the new debt and repayment of $450 million of older debt, the company gains a “significant increase” in financial flexibility for the next few years, said Chief Financial Officer Stephen Farber.

Tenet now has about $1.1 billion of available cash on its balance sheet. The company, which plans to move its headquarters to Dallas, acknowledged in March that its current capital structure was not meant to cover any major legal settlements.

Tenet is contending with Medicare investigations, indictments at a San Diego-area hospital over possible physician recruiting rules violations and lawsuits alleging unnecessary heart surgeries at Redding Medical Center in Redding.

In March, investors worried that Tenet could face a cash shortage after the company said that its banks were limiting its short-term borrowing.

The company is selling 27 hospitals, which would leave it with 69 facilities.

With the note sale, Tenet has cut debt set to mature in 2006 to $290 million from $550 million and its 2007 debt to $210 million from $400 million.

Tenet shares gained 4 cents to $12.49 on the New York Stock Exchange before the terms of the note sale were announced.