Moody’s upgrades Sotera Health

Moody’s Investors Service said it upgraded the first-lien term loan rating to B1 from B2 of Sotera Health Holdings LLC a subsidiary of Sotera Health Co. Moody’s also assigned a B1 corporate family rating, a B1-PD probability of default rating and a SGL-1 speculative grade liquidity rating to the subsidiary. The outlook is stable. Moody’s concurrently withdrew Sotera Health Co.’s B3 CFR and B3-PD PDR

The B1 issuer rating reflects the repayment of about $1.1 billion in debt with net proceeds from Sotera Health Co.’s IPO last month. Debt/EBITDA declined from 7.7x as of Sept. 30, 2020, to about 5x. “Following the IPO, we expect financial policies will remain balanced, and the company will focus on debt repayment. Some governance risks remain, however, as its private-equity owners still hold approximately 70% of the outstanding shares. The B1 CFR also reflects Moody’s expectations that the company’s free cash flow generation will materially improve as result of lower cash interest costs,” said Moody’s in a press release.

The first-lien credit facilities upgrade to B1 from B2 reflects the B1 issuer rating. “The first-lien credit facilities are rated the same as the corporate family rating as they now represent substantially all funded debt in the capital structure,” the agency said.

Sotera plans to redeem in full its $770 million (unrated) second-lien notes soon, Moody’s said.

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