On March 18, 2025, Fitch Ratings downgraded Fortrea Holdings Inc.'s Long-Term Issuer Default Rating (IDR) to 'B' from 'BB-', and its senior secured ratings to 'B+' with a Recovery Rating of 'RR3' from 'BB+'/'RR2'. The Rating Outlook was set to Negative.
This two-notch downgrade reflects Fortrea's weakening credit profile and near-term growth prospects, which Fitch believes have been more significantly impacted than previously anticipated. Despite debt reduction efforts in 2024, Fitch forecasts that EBITDA leverage will remain elevated, in the 6.0x to 8.0x range in the near term.
Fitch expects Fortrea's revenues to decline by 7.3% in 2025 and projects EBITDA margins to decrease by 30 basis points from 7.4% in 2024, due to higher operating costs as a standalone company and a lower contribution from higher-margin post-spin awards. The Negative Outlook indicates that limited or delayed growth could lead to a further downgrade.
The rating agency anticipates EBITDA leverage will rise to 8.0x in 2025 and sustain in the 6.0x to 7.0x range in 2026 and 2027. This assessment highlights significant concerns about the company's financial stability and its ability to compete effectively with larger, better-capitalized peers.
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