Giralda Holding Conexion, S.L.U.

The stable outlook reflects our view that Konecta's sales will increase by 15%-17% in 2021 as the group capitalizes on its market-leading position in Spanish-speaking countries and ability to benefit from the favorable macroeconomic environment. We expect net leverage will decrease below 5.0x, while adjusted EBITDA margins expand beyond 14%. We could lower the rating if growth slows in Spain and Latin America resulting in a continued revenue decline, or if high restructuring costs or operation missteps compress EBITDA margins to below 10%, or result in prolonged negative FOCF. We could also lower the rating if the company adopts a more aggressive financial policy (such as significant debt-funded acquisitions) and maintains adjusted debt to EBITDA above 5x. Additionally, we could

...Despite the impact of the COVID-19 pandemic and unfavorable currency effects in 2020, Giralda Holding Conexion, S.L.U.'s (Konecta's) EBITDA margins demonstrated resilience, underlining the benefits of its business model. Sales decreased by 6.8% in 2020, adversely affected by the depreciation of the Argentinean, Colombian, and Brazilian currencies. At a constant rate and perimeter (excluding the acquisition of Rocket Hall in December 2020), sales increased by 3.0% thanks to resilient demand from clients in sectors that were relatively unaffected by the COVID-19-induced lockdowns in Spain and South America: telecom, finance, and utilities. The company saw increased demand from public administration and e-commerce customers. This growth was also aided by Konecta's capacity to move more than 50% of its workforce to working from home to ensure continued service. The S&P Global Ratings-adjusted EBITDA margin decreased to 11.5% from 12.3% in 2019, depressed by high exceptional costs of about 24...

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