Tenet Is Raising Some Scratch

Tenet THC has its hand out.

The ailing hospital chain -- expected to bleed cash this year and, quite possibly, next -- found a new source of money this week. The company is raising $500 million by selling senior unsecured notes through a private placement.

The move reminded some of the $1 billion debt offering Tenet carried out in early 2003, just months before it slashed its forecast and turned into a junk-rated company with a higher risk profile than some had bargained for. Tenet went on to lose $1.4 billion that year -- more than it earned the two previous years combined -- before finally adopting a drastic restructuring plan, involving the sale of more than one-quarter of its hospitals, in an effort to recover.

The company, still seeking buyers for all but two of those hospitals, said on Monday that it issued the new 10-year unsecured notes to pay off debt with earlier maturity dates and fund "general corporate purposes." It described the offering as a "normal liability management transaction" that allows it to refinance debt before interest rates rise. But some people wonder whether Tenet is really trying to raise cash for a big government fine to settle numerous allegations of wrongdoing.

"My guess is that the investment bankers told Tenet to raise money now instead of once the settlement is announced," said Jeff Villwock, an analyst for Caymus Partners who has been following Tenet on behalf of the Tenet Shareholder Committee for years. "Why do they think that's a good idea? Maybe they know the settlement is going to be worse than the market expects."

Tenet is under investigation for, among other things, possibly bilking Medicare and paying illegal kickbacks to physicians. It also faces hundreds of civil lawsuits for allegedly performing unnecessary -- and sometimes fatal -- heart surgeries on patients at its former hospital in Redding, Calif.