Healthcare service provider Tenet responded to Tuesday's Credit Suisse analyst report, which alleged Tenet may have to file for bankruptcy within the next three years, saying it has the financial resources to stage a turnaround. On Tuesday, Tenet analyst Ken Weakleysaid the company could not sell its hospitals for enough money to turn the company around. "Without an industry recovery in volume or patient insurance, a Chapter 11 filing may be necessary," he said, causing shares to drop more than 9%. On Wednesday, Tenet CFO Biggs Porter responded by saying the company had the resources to stage a turnaround without selling resources. With the company's "cash on hand and bank credit line, we would have the ability -- although it is not anticipated -- to tap the credit markets using our asset base," he said. As of June 30th Tenet had $675 million in cash and a credit line of up to $500 million. Stanford Group analyst Gary Lieberman noted that the company is in a "catch-22": it needs to preserve cash, but to spend it to increase the quality of its hospitals and increase revenues. Last week CEO Trevor Fetter and a director spent $486,400 to buy 129,500 shares on the open market. In intraday trading Wednesday, traders are thus far unmoved by the company's response: shares are flat at $3.34. Over the past year, Tenet stock is down 55%.
Sources: Press Release, Bloomberg, Reuters, Barron's
Commentary: Time to Take Another Look at Tenet Healthcare? • Tenet Healthcare Makes Good With the SEC
Stocks/ETFs to watch: THC. Competitors: CYH, KND. ETFs: PTH, RXL
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