Sotera considering new debt financing for settlement agreement

By Sara Rosenberg

New York, Jan. 10 – Sotera Health Co. plans to pursue incremental debt financing in the first half of 2023 to fund a significant portion of an agreement reached by its subsidiary, Sterigenics, to settle the more than 870 ethylene oxide cases pending against it in the Circuit Court of Cook County, Illinois, and U.S. District Court for the Northern District of Illinois, according to an 8-K filed with the Securities and Exchange Commission on Tuesday.

The incremental debt financing may include secured debt raised in the bank or capital markets, which may increase the company’s leverage above its long-term target net leverage range of 2x to 4x.

Sterigenics will pay $408 million to settle the claims, subject to substantially all of the plaintiffs providing opt-in consents to their individual settlement allocations and dismissing their claims with prejudice.

An escrow account to pay the settlement will be funded by May 1, 2023.

If the final settlements do not occur due to failure of certain conditions, the proposed incremental debt financing would be used to secure collateral needed for an appeal of the adverse judgment in the ethylene oxide litigation.

The company also disclosed in the 8-K that during the fourth quarter, to enhance liquidity in connection with projected litigation-driven expenses, it borrowed $200 million under its existing secured revolving credit facility, which was held as cash at year-end 2022.

Sotera is a Broadview Heights, Ohio-based provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the health care industry. Sterigenics is a provider of outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets.

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