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Tenet Works Out New Deals With Its Lenders

March 10, 2004|Lisa Girion | Times Staff Writer

Tenet Healthcare Corp. said Tuesday it renegotiated credit agreements with most of its banks so the company could stay in compliance while selling off some of its hospitals.

Santa Barbara-based Tenet, the nation's second-largest hospital chain, is the target of multiple federal investigations and is trying to cut costs by selling 27 facilities. In January the company said earnings would fall short of expectations this year and that it would take a $1.4-billion charge to write down the value of its hospitals.

The new credit agreement allows Tenet's debt to be 5.5 times its earnings before income taxes and depreciation, instead of the previous ratio of 3.5. Earlier, Tenet said it expected to violate terms of its previous bank agreement by exceeding its debt limit in the second or third quarter.

As part of its new agreement, Tenet pledged the capital stock of some of its subsidiaries, a sign analysts said that banks were wary of making unsecured loans to the company.

The deal also reduces the money available to Tenet under the loan agreement to $800 million from $1.2 billion.

The company said it had $425 million in cash on hand after paying a $148-million court award to an executive it fired 10 years ago.

"We have had a very constructive dialogue with our bank group, and we are very pleased with this outcome," Stephen Farber, Tenet's chief financial officer, said in a statement.

"People can try and spin this ... saying Tenet has assured some liquidity in a very difficult time," said Andreas Dirnagl, an analyst with Harris Nesbitt Gerard. "There's no way around the fact that the [credit agreement] is smaller, is secured and is all around more restrictive."

By requiring stock pledges and guarantees from the subsidiaries that operate the hospitals, Dirnagl said, the banks had improved their ability to collect if that becomes necessary.

The new credit arrangement is "not a huge vote of confidence from the banks," said Maryann Hennessey, an analyst with independent subscription research firm Criterion Research Group.

Tenet's shares fell 28 cents Tuesday to $11.72 on the New York Stock Exchange.

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