Tenet Is Raising Some Scratch

Last week, the Los Angeles Times reported that Tenet could wind up paying "more than $1 billion" to settle its myriad problems. But sources close to the government talks have told TheStreet.com to expect a higher global settlement fee of around $1.5 billion. They also point out that civil penalties at Redding, now expected to total around $500 million, are not included in that figure.

Villwock, for one, continues to warn of massive exposure.

"It's got to be something over $2 billion," Villwock said of Tenet's liabilities. "That's what we've said from the beginning."

Tenet spokesman Steven Campanini told TheStreet.com on Tuesday that it is too early to speculate about the "size or shape of a settlement with the [Justice Department] or others." He also said that this week's bond offering is "in no way linked with recent market and media speculation" about a deal with the feds.

"Our new management team is working to resolve issues facing the company," Campanini assured, "but currently, there are no settlements in place. And we do not expect them any time soon."

Even Villwock said he would be "shocked" if Tenet reaches a deal this year. Still, Argus bond analyst William Eddleman wonders how Tenet can foot a $2 billion bill at all.

"That's a staggering amount -- especially for a company with negative cash flow," said Eddleman, who recommends selling Tenet's debt. "To assume the public security buyers are going to finance all that is a false assumption. They're not. I've seen too many bankruptcies, and it just doesn't work out that way."

But Tenet clearly plans to try. The company told investors during a March conference call that it will rely on the capital markets to finance a "good portion" of any major government settlement. Still, it said it would seek out the funds only after a deal was in place.

"It is much better to have a settlement in hand and then approach the market," CFO Stephen Farber explained. "That way, investors have a more definitive sense, postsettlement, what the financing needs are for the company, and we can raise the necessary money on better terms at that time."