TEXT-S&P affirms Constellation Brands at 'BB+'

Overview
-- U.S.-based Constellation Brands Inc. announced that it has
signed a definitive agreement with Anheuser-Busch InBev N.V./S.A. to purchase
the remaining 50% interest in Crown Imports LLC for $1.85 billion (representing
about an 8.5x multiple of 50% of Crown's EBIT).
-- We are affirming our 'BB+' corporate credit and senior unsecured debt
ratings on Constellation Brands.
-- The stable outlook reflects our expectation that management is
committed to credit quality. We believe the restoration of the company's
financial profile and return to credit metrics closer to current levels will
remain a higher priority than funding additional growth investments or
shareholder friendly initiatives.

Rating Action
On June 29, 2012, Standard & Poor's Rating Services affirmed its 'BB+'
corporate credit and senior unsecured debt ratings on Constellation Brands.
The outlook is stable.

Rationale
The rating affirmation follows Victor, N.Y.-based Constellation Brands'
announcement that it has signed a definitive agreement with Anheuser-Busch
InBev (ABI) to purchase the remaining 50% interest in Crown Imports LLC for
$1.85 billion (representing about 8.5x multiple of 50% of Crown's EBIT) when
ABI completes its proposed acquisition of Grupo Modelo S.A.B. de C.V.
Constellation Brands currently owns 50% of Crown, a 50-50 joint venture with
Grupo Modelo. Crown, is a leading marketer of imported beer in the U.S.,
primarily Modelo beer brands.

Constellation Brands has disclosed it has fully committed bridge financing in
place to complete this transaction, but expects permanent financing to consist
of a combination of revolver borrowings, a new term loan under its current
senior credit facility (unrated), and the issuance of senior notes.
Constellation Brands expects to complete the transaction, subject to
regulatory approval, during the first quarter of calendar 2013.

In addition, the company announced it is purchasing Mark West, a California
pinot noir brand. Constellation Brands expects this acquisition to close in
July.

While we believe the transactions will strengthen Constellation Brands'
position as the largest multicategory supplier of beverage alcohol in the
U.S., almost doubling its reported sales base, the company will finance the
Crown transaction with debt. We estimate that pro forma for both transactions,
fiscal year-to-date share repurchase activity, and recent debt refinancing,
key credit ratios (including our standard adjustments) will weaken from fiscal
2012 year-end levels. Specifically, we believe the ratio of total debt to
EBITDA will be about 4.6x, increasing from 3.9x for the year ended Feb. 28,
2012; and the ratio of funds from operations (FFO) to total debt will be about
14%, down from about 19.5%, for the same period.

We consider leverage (as measured by total debt to EBITDA) of 3x-4x and
FFO-to-total debt of 20%-30% consistent with a "significant" financial risk
profile--but expect these credit measures to be closer to the weaker end of
the respective ranges within one year of completing the Crown acquisition. We
do not anticipate that Constellation Brands will engage in additional
acquisitions or share repurchases in the near-term, but expect the company
will apply discretionary cash flows to repay debt in order to strengthen its
financial profile.

Our assessment of Constellation Brands' business risk profile, including 100%
of Crown, remains "satisfactory." Key credit factors in our business risk
assessment include the company's portfolio of well-known beverage alcohol
brands and historically strong cash generation in the highly competitive
beverage alcohol markets, yet relatively narrow geographic focus.

According to Constellation Brands, it is the world's leading premium wine
company, with leading positions within its primary markets of the U.S. and
Canada, which are highly competitive and fragmented. In fiscal 2012, wine
accounted for a significant portion of Constellation Brands' sales. Its wine
portfolio is complemented by select premium spirits brands and other select
beverage alcohol products, including imported beer through its Crown joint
venture.

According to Beer Marketer's Insights, during 2011, overall beer shipments
declined 1.5% in the U.S., yet imported beer shipments increased by 2.7%. We
estimate that pro forma for Constellation Brands' acquisition of the remaining
50% interest in Crown, the company's current concentration in wine will
decline and represent about half of its sales going forward. However,
geographical diversification remains limited, and we expect sales to remain
largely in the U.S. after the Crown acquisition.

Since the company does not expect the Crown transaction to be completed until
the first calendar quarter of 2013, our fiscal 2013 forecast remains largely
unchanged, except we now do not anticipate that Constellation Brands will
engage in additional acquisitions or share repurchases in the near-term, but
expect that the company will apply discretionarycash flows to debt to
strengthen its financial profile prior to the acquisition.

Other forecast assumptions for fiscal 2013 include:
-- Approximately $383 million share repurchases already made in the first
quarter of fiscal 2013, yet no further share buybacks this year;
-- Net sales growth in the low-single-digit percentage area;
-- Operating margins will be somewhat pressured compared with fiscal 2011
due to planned brand-building and investments;
-- A tax rate in line with the standard U.S. corporate tax rate of 35%;
-- Cash dividends from its Crown joint venture near current levels of
about $230 million; and
-- Higher interest expense as a result of its recent refinancing
transactions and committed bridge financing.

We expect leverage will be about 3.6x and FFO-to-debt about 18% at fiscal
year-end and prior to the close of the acquisition. FFO-to-total debt in the
high-teens percentage area is more consistent with the indicative financial
ratio range of 12% to 20% for an "aggressive" financial profile and is likely
a result of Constellation Brands' geographic concentration in the U.S. (which
has a higher corporate tax rates than most other countries).

Liquidity
We believe Constellation Brands' liquidity will remain "adequate" (as
described in our criteria) and estimate that sources of cash will continue to
exceed uses for the next 12 months. Our view incorporates the following
assumptions:
-- We expect liquidity sources (including cash, discretionary cash flow,
and availability under its $850 million revolving credit facility for general
corporate purposes) to exceed uses by 1.2x or more over the next 12 months.
-- We expect liquidity sources to continue to exceed uses, even if EBITDA
were to decline by 15%.
-- We believe Constellation Brands has solid relationships with its banks
and a generally satisfactory standing in the credit markets.

It is our opinion that the company's relatively stable cash flow
characteristics will continue, despite a very competitive operating
environment and some seasonal working capital needs. Peak borrowing on the
revolving credit facility generally occurs one or two months after the crush
season has ended. In the U.S. and Canada, the annual grape crush normally
begins in August and runs through October. In New Zealand, the annual grape
crush normally begins in February and runs through May. The company generally
begins taking delivery of grapes at the beginning of the crush season, with
the majority of payments beginning to come due within 90 days. However,
including Crown, we expect seasonal peak borrowing needs to lessen, because
beer sales are typically highest during the first and second quarters of the
company's fiscal year (which correspond to the spring and summer periods in
the U.S.).

Recovery analysis
The issue-level rating on Constellation Brands' senior unsecured notes is
'BB+', the same as the corporate credit rating. The recovery rating is '3',
indicating our expectation for meaningful (50% to 70%) recovery in the event
of a payment default. For the complete recovery analysis, please see the
recovery report on Constellation Brands Inc., published May 30, 2012, on
RatingsDirect.

Outlook
The outlook on Constellation Brands is stable. We expect Constellation Brands
to maintain its financial performance despite lingering weak macroeconomic
conditions. While we expect pro forma credit measures will be weak for a
"significant" financial profile following the Crown acquisition, we believe
the company will forego shareholder-friendly initiatives in the
near-to-intermediate term and apply discretionary cash flows to debt in order
to strengthen credit ratios within one year of closing of the Crown
transaction. This will include reducing and sustaining leverage close to 4x
and FFO-to-debt in the high-teens percentage area.

However, should operating performance weaken or if the company is unable to
improve its leverage to 4x within one year of closing the Crown acquisition,
we could revise the outlook to negative or consider a lower rating.

Although unlikely in the next year, we could upgrade the company if it
demonstrates a track record of moderate financial policies and further
strengthens its credit measures, including leverage approaching and sustained
near 3x and funds from operations to total debt remaining above 20%.

Related Criteria And Research
-- Methodology And Assumptions: Liquidity Descriptors For Global
Corporate Issuers, Sept. 28, 2011
-- Key Credit Factors: Criteria For Rating The Global Branded Nondurable
Consumer Products Industry, April 28, 2011
-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded,
May 27, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Ratings List
Ratings affirmed
Constellation Brands Inc.
Corporate credit rating BB+/Stable/--
Senior unsecured notes BB+
Recovery rating 3
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
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