The rating upgrade from BB, Positive Outlook, to BB+, Positive Outlook, is primarily driven by the group’s strong deleveraging in 2016 (Scope-adjusted debt/EBITDA of 0.6x in 2016) and the prospects for further deleveraging, with the early redemption of the EUR 35m MARF bond bolstered by further margin improvements and strong free cash flows. The rating, however, remains to some extent constrained by: the cyclicality of the group’s industry, information and communications technology (ICT); persisting high dependence on economic developments in its core market of Spain; and its limited corporate size.

Scope positively views a takeover by the leading Spanish-based ICT provider Indra, as this can reduce the major credit weaknesses of Tecnocom, such as limited outreach and diversification outside of Spain, without significantly harming the combined financial risk profile of the entity.

Download the updated rating report on Tecnocom.