Moody's Ratings has affirmed Fortrea Holdings Inc.'s B3 Corporate Family Rating and simultaneously updated the company's outlook from negative to stable.
The rating firm also maintained a B3-PD Probability of Default Rating, B3 ratings on the company's senior secured bank credit facilities and senior secured notes, and kept the Speculative Grade Liquidity rating at SGL-3.
Moody's assessment projects that Fortrea's operating performance will improve over the coming 12 to 18 months, leading to a reduction in financial leverage. The agency expects adjusted debt-to-EBITDA to decline to below 10.0 times within that timeframe. In its calculations, Moody's does not add back stock compensation expense to EBITDA and treats the company's $300 million accounts receivable securitization facility as a debt-like obligation.
The stable outlook reflects Moody's view that credit metrics will strengthen modestly over the next 12 to 18 months and that liquidity will remain adequate. The agency cited modestly positive free cash flow and full access to the company's revolving credit facility as supporting factors for liquidity.
For the twelve-month period ended September 30, 2025, Fortrea's adjusted debt/EBITDA stood at 12.3x, and 15.6x when the accounts receivable securitization facility is included. Moody's noted that part of the expected improvement in leverage stems from an anticipated reduction in stock compensation expense.
As of September 30, 2025, Fortrea reported approximately $131 million in cash and cash equivalents. The company has a $450 million revolving credit facility that expires in June 2028; Moody's reports there were no borrowings under that facility as of September 30, 2025.
Despite the revised outlook, Moody's emphasized that governance risk factors materially informed the rating action. The agency pointed to execution risk and management's track record as important considerations and stated that Fortrea's financial leverage remains significantly higher than initially anticipated.
Moody's set clear benchmarks for upgrading the rating: Fortrea would need to demonstrate sustained profitable growth, improved liquidity, and strong free cash flow, while keeping adjusted debt/EBITDA below 5.0 times. Conversely, the agency warned that a failure to improve operating performance or any weakening of liquidity could prompt a downgrade.
Key financial metrics cited by Moody's remain focused on leverage, cash position, and access to credit. The agency's treatment of certain items - specifically excluding stock compensation add-backs from EBITDA and treating the $300 million securitization as debt-like - affects the reported leverage ratios and frames the pathway to potential rating improvement.