Fitch to Rate GP Investments' Perpetual Notes 'B/RR4' on Extension.

NEW YORK -- Fitch Ratings expects to assign a 'B/RR4' rating to GP Investments Ltd (GP) extension of the 2007 senior perpetual notes program. The Rating Outlook is Positive.

On July 25, 2007, Fitch revised the Rating Outlook of GP's IDR ('B') and its original US$150 million perpetual notes issuance to Positive from Stable given the significant expected increase in assets under management and its positive effects over GP's recurrent income. Resolution of the Positive Outlook will depend on the ability of GP to sustain the expected increase in recurring income and keep an adequate control of its expenses, while a successful deployment of new investments will also be monitored. The need for a significantly more diversified investment portfolio, a further increase of recurrent income to cover operating expenses, and a more developed valuation methodology, are key to sustain an improvement of GP's rating going forward.

The perpetual notes will have no fixed final maturity date and will be repaid only in the event that the Issuer redeems the notes or upon acceleration due to an event of default. The notes will be general unsubordinated obligations of GP and will rank pari passu with the company's unsubordinated indebtedness. The obligations of GP under the notes will be supported by an 18-month coupon payment reserve which will be deposited in a trustee. The rating of the issuance recognizes the liquidity implicit in the coupon reserve, augmented by substantial cash currently on hand, nevertheless, the concern is that the latter is intended to be used for investments, and its availability at any point during the life of the debt instrument is difficult to predict.

GP's ratings are supported by adequate leverage levels, the franchise of the company and the experience of the management team which bodes well for positive prospects going forward. Also, the significant increase in the size of its portfolio of managed investments results in a positive trend on its recurrent income. The ratings are constrained, however, by the concentrated nature of the current and intended investment portfolio (by country and by individual investment size), the uncertainty related to the maturation period of the investment portfolio, and GP's timing and ability to realize investment gains.

GP is a Bermuda exempted company that consolidates the activities of a private equity business and an asset management business in Brazil. The origins of the company date back to 1993. A major corporate reorganization was completed in 2005 in preparation for an IPO of the company during year 2006. GP is listed on the Luxembourg Stock Exchange and also has a BDS program on the Brazilian Stock Market (Bovespa).

Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery

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