Sixsigma Networks Mexico, S.A. De C.V.(KIO Networks)

The stable outlook on KIO reflects our view that despite challenging business conditions in the next 12 months, the company's credit profile won't worsen. We expect KIO to continue diversifying its client portfolio and reducing its exposure to the Mexican government, without hampering its profitability. We estimate that key credit metrics will remain commensurate with the current rating level, with adjusted debt-to-EBITDA ratio within 4.0x-4.5x, EBITDA interest coverage above 2.0x, and an adequate liquidity position. We could downgrade KIO in the next 12 months if the company's operating and financial performance worsens from lower demand for its IT services and fewer contract renewals. This could imply a sharper decrease in KIO's revenues offsetting potential cost savings, hampering KIO's EBITDA and

...KIO remains positioned as a leading provider of technology services in Mexico, although exposure to government contracts could weigh on its operating and financial performance. SixSigma Networks Mexico, S.A. de C.V. (KIO) remains one of the leading technology services provider in Mexico, with the largest data center installed capacity in the country. It's able to provide tailored technology services ranging from managed services to cybersecurity and cloud services, among others. Since its foundation in 2002, KIO has worked closely with Mexican government entities and large- and mid-sized enterprises, retaining its largest customers for more than eight years on average. Since the new administration took office in December 2018, the government has implemented austerity measures at different federal levels, which has led to it seeking discounts from its service providers, including KIO. For the past twelve months, KIO's revenue mix was roughly half from private sector and half from public...

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