Moody’s changes Group 1 view to stable

Moody’s Investors Service said it affirmed the ratings of Group 1 Automotive, Inc., including the Ba1 corporate family rating and changed the outlook to stable from negative. The SGL remains unchanged at SGL-2.

“The outlook change to stable reflects the effectiveness of Group 1’s strategy and execution as it has dealt with decreased revenues across the board due to the coronavirus, with the end result operating income is actually higher for the first half of 2020 compared to prior year despite a 19% drop in revenue,” said Charlie O’Shea, a Moody’s vice president, in a press release.

“This validates the flexibility in Group 1’s business model, with management following a similar playbook as during the 2008-09 recession by quickly reducing variable costs, with SG&A down almost $100 million year-over-year, outweighing the reduction in gross profit due to reduced volumes. With reductions in borrowing costs due to April’s debt repayment via lower-cost mortgage financing, Group 1’s interest coverage has rebounded to around 4.5 times, well above Moody’s 4 times downgrade trigger,” O’Shea said.

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