Moody's rates Group 1 notes B1

Moody's Investors Service assigned a B1 rating to Group 1 Automotive, Inc.'s planned $150 million senior subordinated notes and confirmed its existing ratings including its $75 million 10.875% senior subordinated notes due 2009 at B1. The outlook remains stable.

Moody's said the ratings continue to reflect Group 1's prudent financial profile and history of consistently reducing non-vehicle debt through cash from operations. Group 1 carries a relatively small amount of non-vehicle debt relative to assets.

The ratings also reflect a history of maintaining appropriate debt protection and coverage measures even during a weak vehicle market, as well as the expectation that those measures will be sustained; Group 1's policy of continuing to use equity for some portion of acquisitions; its success at increasing higher margin businesses, which is helping to offset cyclical profit declines in auto sales; the benefits of brand and geographic diversification; and success in quickly integrating and improving profitability of acquired dealerships.

The ratings also reflect Group 1's relatively thin profit margins, which are typical of the automotive retailing industry, as well as the expectation that a high level of variable costs for new car sales will allow margins to fluctuate within a narrow range with the variation in consumer demand for cars, Moody's said. The ratings also incorporate the risk of fluctuating used car inventories, which can cause profit margins to vary significantly over the short term; relatively high leverage when including floor plan financing; and the high reliance on captive credit subsidiaries of automotive manufacturers for working capital needs.

The rating outlook is stable, and assumes that Group 1 will maintain its traditional financial policies, which includes reducing the proportion of non-vehicle debt over time and prudent strategies with regards to acquisitions and returns of capital to shareholders.

Moody's said it expects that Group 1's debt protection measures will remain close to prior year levels despite the weak auto market and the temporary increase in non-vehicle debt as a result of the issuance. EBITDAR to fixed charges, including floor plan interest, is expected to remain near the 2.8 times achieved during 2002. Proceeds from the proposed debt issuance will be temporarily used to reduce floor plan obligations, partly offsetting the increased interest expense.

S&P rates Group 1 notes B+

Standard & Poor's assigned a B+ rating to Group 1 Automotive Inc.'s proposed $150 million senior subordinated notes due 2013 and confirmed its existing ratings including its subordinated debt at B+.

S&P said the ratings reflect Group 1 Automotive Inc.'s position as one of the largest auto retailers in the U.S., its ambitious expansion strategy, and its aggressive financial policies.

Group 1 has been a leading consolidator in the highly fragmented auto-retailing sector, S&P noted. Revenues have grown to about $4.5 billion from $400 million in 1997, making Group 1 one of the 10 largest dealership groups in the U.S.

Group 1 has had good success to date - considering its short history - integrating acquired dealerships while maintaining relatively stable profit margins on a growing revenue base. The company faces significant challenges, however, to continue absorbing acquired dealerships, particularly given the pace of its expansion, S&P added.

The extent to which financial performance could erode in a more severe cyclical downturn is a major risk factor.

Additional business challenges include a high dependence on vehicle manufacturers, which exert considerable oversight by controlling vehicle allocation, marketing subsidies, and financing support and monitoring showroom appearance, servicing facility capabilities, inventory maintenance and customer satisfaction, S&P said. The industry is large, fragmented, and highly competitive, with dealerships often willing to undercut a competitor's price to secure a sale. Product differentiation among dealerships is difficult, dependent on consumer perceptions of service quality.

Debt leverage will increase temporarily with the proposed new debt issue, S&P noted. Over time, excess proceeds are expected to be used to make investments that will increase earnings and cash flow generation. Future acquisitions and share repurchases are expected to result in continued aggressive debt use. Group 1 plans to acquire an additional $800 million in revenue during 2003. A balanced use of debt and equity is necessary to preserve access to capital markets and liquidity. S&P expects EBITDA interest coverage to average about 2x to 3x and total debt to capital to average about 75% during the next few years.

Moody's rates MobiFon notes B3

Moody's Investors Service assigned a B3 rating to MobiFon Holdings BV's $225 million 12.5% senior notes due 2010 and a B1 to MobiFon SA's $300 million senior secured credit facilities maturing 2008. The outlook is stable.

Moody's said the ratings reflect the company's pure domestic focus which results in exposure to the economy of Romania (i.e. risks related to economic reform, regulation, inflation and currency exchange); the risks associated with successfully managing rapid growth whilst maintaining financial discipline and customer service; the risks associated with operating in a competitive market, where MobiFon's main competitor, Orange SA, is part of a larger telecom group with superior financial wherewithal; the risks associated with potential unpredictability with respect to market development, including penetration rates, pre-paid/post-paid mix and levels of ARPU; and the risks associated with ongoing regulatory changes associated with expected second wave EU accession and UMTS developments.

Positively, Moody's ratings also reflect MobiFon's market leading position in the Romanian mobile market; MobiFon's established and profitable operations that have demonstrated impressive organic growth; the quality of MobiFon's network and expansive footprint; the attractive dynamics of the Romanian mobile market in terms of future growth prospects and relative to fixed line penetration; the improving regulatory transparency in the market; and the good level of transparency of MobiFon's operations and financial reporting.

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