Tenet Lowering Bar on Asset Sales

Tenet is attempting to sell 19 hospitals in the Golden State, more than a dozen of them in the Los Angeles area alone.

"I think there is a threat that some of the hospitals will close down," Lauri Sobel, an attorney for the watchdog group Consumer's Union, told TheStreet.com earlier this year. "We know how much work it is to find buyers for one hospital -- let alone 19 throughout the state and 15 in one county."

Right now, Tenet has booked both the hospitals held for sale -- valued at $985 million -- and the A/R balances tied to them as current assets. So the sales process could reduce Tenet's total assets by more than $1 billion and still leave the company without any cash proceeds afterwards.

To be fair, Farber indicated that Tenet's liabilities will decrease as well. The company has not indicated by how much, however.

Regardless, Argus bond analyst Bill Eddleman is concerned about the potential hit to Tenet's balance sheet. Indeed, he remains worried about the company's condition in general.

"They anticipate a net cash loss [from operations] of $500 million to $600 million for the year, and there is still no resolution of any of the major legal issues facing this company," said Eddleman, who recommends selling Tenet's bonds. "This corporation is in very serious difficulties."

Change of Heart

But the stock market -- and at least one former bear -- would disagree. The stock has rallied hard on a recent quarterly update that, at the very least, contained no new bombshells and even some favorable developments in crucial trends such as bad debt. The shares rose again on Wednesday, climbing 1.4% to $12.27, after Prudential Equity analyst David Shove abandoned his long-time underweight recommendation on the company.

Shove upgraded his rating to neutral and his price target to $13 because he feels that Tenet's latest quarterly report "provided significantly better earnings and liquidity visibility."

"It may not be light," he acknowledged. "But at least we can see the tunnel."

« Previous Page

1 2 3 4

Next Page »