HCA and Tenet Healthcare Corp. each recently increased the size of debt offerings to $1.5 billion.
Such boosted offerings, while not unique in-and-of-themselves, come at a time when the high-yield market is "quite volatile" and saw limited transactions in December, said Britton Costa, a senior director on Fitch Ratings' healthcare team.
"To see an upsized offering after a pretty long dry spell was an interesting sign of where the market is," he said. "It probably says more about debt investors than hospitals in the debt capital market."
Nashville-based HCA completed a public offering on Jan. 22 of $500 million of 5.625% senior notes due 2028, according to a U.S. Securities and Exchange Commission filing. That's on top of a $1 billion issue of senior notes due 2029, which HCA said it expects to deliver to investors Jan. 30.
The same day, Dallas-based Tenet announced it was upping the size of its private debt offering to $1.5 billion aggregate principal amount of senior secured notes due 2027, which carry an interest rate of 6.25%. That announcement followed an earlier one that said the offering consisted of $750 million of the notes that mature in 2027. Tenet said in a news release it will use the proceeds to refinance $1.52 billion in outstanding notes due in 2019, 2020 and 2022.
HCA said its proceeds will be "used for general corporate purposes, which may include acquisitions."
Fitch's Costa said he thinks over the next few years, HCA will see higher capital expenditures as it integrates new acquisitions, such as Memorial Health System in Savannah, Ga., and the pending acquisition of Mission Health in Asheville, N.C., likely to close early this year. That said, he does expect there will be more deal announcements coming from HCA in the future, especially potential tuck-in deals and expanding the company's presence in existing markets.
Meanwhile, Tenet's management of forward debt maturities is something Fitch expects all companies to be doing, Costa said.
"That was a transaction that took financial risk off the table for them," he said.
Fitch calculated Tenet's debt at 6.1 times its earnings before interest, taxes, depreciation and amortization, or EBITDA, as of Sept. 30, 2018, but said in a news release that could fall below 6 times by the end of 2019.
S&P wrote in a news release that its ratings on Tenet reflect the company's improving operating results and cash flow.
"We believe that the company's improved focus on its core markets and increased investment in outpatient surgery should improve its margins," S&P wrote. "The ratings also reflect our anticipation that Tenet's leverage will remain over 6x for at least the next year."