Tenet Repurchases Senior Notes - Analyst Blog - Tenet Healthcare (NYSE:THC)

Tenet Healthcare Corporation (THC) declared a tender offer to repurchase up to $800 million aggregate principal amount of its outstanding 7.375% senior notes due in 2013. Tenet will close its tender offer on August 30.

The aggregate principal amount of the notes to be purchased will be limited to $800 million. If it exceeds the limit, the notes purchased will be distributed on a pro rata basis as per the terms of purchase.

Following the announcement of the offer, about 78.3% of the senior note holders were convinced to dispose of their notes.

Meanwhile, Tenet also completed its private offering of $600 million aggregate principal amount of 8% senior notes due 2020. Tenet plans to utilize the proceeds from the offering of $600 million to partially fund the buy back of 7.375% senior notes. Tenet will use any remaining net proceeds for repurchases of its outstanding senior notes through publicly or privately negotiated transactions.

At the end of second quarter 2010, adjusted free cash flow from continuing operations were $121 million, with cash and cash equivalents of $711 million.

Though Tenet has been focusing on cost efficiencies, controlling labor costs in a fluctuating patient volume environment is a tough challenge, as inflation and technology improvements drive supply costs higher, and the efforts to control supply costs through product standardization, bulk purchases and improved utilization become difficult.

Overall, we strongly believe that volume growth can significantly help in boosting the earnings outlook of Tenet and its labor cost management in the future.

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Tenet Repurchases Senior Notes - Analyst Blog

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