Moody's rates Global Motorsport notes B2

Moody's Investors Service said it assigned a B2 rating to Global Motorsport Group Inc.'s proposed $85 million of guaranteed second-lien senior secured notes maturing 2008 to be initially issued under Rule 144A.

The outlook is stable.

Moody's said the proposed guaranteed second-lien senior secured notes offering will refinance all of Global Motorsport's existing bank debt and seller subordinated notes and will thereby improve the company's financial flexibility.

Moody's noted the rating assignment reflects Global Motorsport's high pro forma leverage and weak pro forma cash interest coverage, following a series of years of uneven operating performance and substandard internal controls and financial reporting under the former management team. Due to unusual circumstances, the company remained in covenant default since May 2002 of the existing credit agreement, which is presently in the process of being refinanced.

This situation drove up the borrowing rate for the associated debt and left Global Motorsport with a "going concern" audit qualification. Moody's said Global Motorsport expects to resolve most of these capitalization and reporting issues in conjunction with the refinancing of all of its funded debt and efforts to address any remaining internal control issues following the implementation of its new state-of-the-art information technology system.

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