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Investing.com -- S&P Global Ratings upgraded Tenet Healthcare Corp (NYSE:THC). to ’BB-’ from ’B+’ on Monday, citing the company’s improved credit profile following its multiyear strategic plan.
The rating agency also raised Tenet’s first-lien senior secured debt to ’BB’ from ’BB-’ and its second-lien and unsecured debt to ’B’ from ’B-’.
S&P noted that Tenet has successfully expanded its ambulatory surgery business, rationalized its hospital portfolio, and reduced debt. The ambulatory surgery center (ASC) business now generates about 24% of Tenet’s total consolidated revenue, contributing a higher percentage to overall profitability.
The company’s leverage decreased significantly to 3.5x as of March 31, 2025, from 3.6x as of December 31, 2024, and 5.2x as of December 31, 2023. This improvement was partly due to $5 billion in hospital sales proceeds generated in the past two years, which Tenet used primarily to repay debt and boost cash reserves.
S&P expects Tenet’s leverage to remain around 4x for the next couple of years, based on industry risk, growth prospects, cash flow, and financial policy assumptions.
The rating agency assigned a positive outlook, reflecting its view that Tenet can maintain leverage below 4x while managing potential impacts from pending health policy developments.
S&P believes Tenet’s continued investments in ASC, operating initiatives in acute care, and favorable industry conditions provide a foundation for improved margins and cash flow. The company has indicated that growing its ASC business remains a top priority, though at a slower pace than in recent years.
The rating agency expects Tenet to produce annual free cash flow of $1.2 billion-$1.4 billion in 2025 and 2026, after distributions to noncontrolling interests. How the company deploys these resources will be key to determining whether its credit profile improves further.
S&P noted that while there could be some risk from the Reconciliation bill currently moving through Congress, Tenet has sufficient cushion at this rating level and could implement mitigating measures if needed.
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