Moody's Investors Service today upgraded all ratings of Group 1 Automotive, Inc. ("Group 1"), including the Corporate Family rating, which was upgraded to Ba1 from Ba2. A stable outlook was assigned. This concludes the review for upgrade that was initiated on June 16, 2015.

Issuer: Group 1 Automotive, Inc

Ratings Upgraded

Corporate Family Rating to Ba1 from Ba2

Probability of Default Rating to Ba1-PD from Ba2-PD

$550 million senior unsecured notes to Ba2, LGD 6 From Rating Under Review B1, LGD 6

Outlook, Changed To Stable From Rating Under Review

RATINGS RATIONALE

"The upgrade largely reflects the reduction in adjusted debt due to changes in Moody's approach for capitalizing operating leases," stated Moody's Vice President Charlie O'Shea. The updated approach for standard adjustments for operating leases is explained in the cross-sector rating methodology Financial Statement Adjustments in the Analysis of Non-Financial Corporations, published on June 15, 2015. "As a result of this change, Group 1's leverage has improved to around 4 times from around 4.7 times under the prior methodology," O'Shea added. "In addition, Group1's operating performance continues to benefit from positive macroeconomic conditions for auto sales in the US and UK, and Brazil is beginning to generate positive traction."

The Ba1 rating considers Group 1's market position and brand mix, with over 80% import and premium luxury brands, diversification via its UK operation, and positive trends in Brazil. Ratings also consider the company's conservative financial policy. The stable outlook reflects our belief that Group 1 will continue to manage its cost structure such that its operating performance remains resilient even in the event of a downturn and credit metrics remain largely in balance. Given the upgrade, upward rating momentum is presently tempered, though over time an upgrade could occur if the company's debt/EBITDA was maintained at around 3.5 times and EBITA/interest was maintained at greater than 5 times. A downgrade could occur if the company's debt/EBITDA was sustained above 4.25 times or if EBITA/interest fell below 4 times.

The principal methodology used in these ratings was Global Retail Industry published in June 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.