TEXT-S&P rates Constellation Brands notes 'BB+'
Aug 6 - Standard & Poor's Ratings Services assigned its 'BB+' issue-level and '3' recovery ratings to Constellation Brands Inc.'s proposed $650 million senior unsecured notes due 2023. The '3' recovery rating indicates our expectation of meaningful recovery (50%-70%) in the event of payment default. The notes will be issued under the company's Rule 415 shelf registration. Constellation Brands has indicated that it plans to use the net proceeds from this offering to partially pre-fund its pending acquisition of the remaining 50% interest in Crown Imports LLC (not rated). The proceeds from the offering will be held in escrow until the proposed acquisition is completed, assuming it's completed as currently described. As such, we will net the cash held in escrow against debt in the interim until the acquisition is completed. Our corporate credit rating on Constellation Brands reflects our assessment of the company's "satisfactory" business risk profile and "significant" financial risk profile. Key credit factors considered in our business risk assessment include the company's diverse portfolio of consumer brands and historically strong cash generation in the highly competitive beverage alcohol markets, yet relatively narrow business and geographic focus. Our financial risk profile incorporates Constellation Brands' moderate financial policy, adequate liquidity, and key credit measures that we believe will remain within or near indicative ratio ranges for a significant financial profile, including leverage (as measured by total debt to EBITDA) of 3x-4x. Pro forma for the proposed Crown transaction, we estimate key credit ratios (including our standard adjustments) will weaken from fiscal 2012 year-end levels. Specifically, in our view, total debt to EBITDA will be 4.6x but will improve to near 4x within one year of closing of the Crown transaction because we expect that Constellation Brands will forego shareholder-friendly initiatives and apply discretionary cash flow to debt in the intermediate term. 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 Constellation Brands Inc. Corporate Credit Rating BB+/Stable/-- New Rating Constellation Brands Inc. $650 mil. sr unsecd notes due 2023 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 www.standardandpoors.com. Use the Ratings search box located in the left column.
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