Fitch Rates Constellation Brands New Sr Notes 'BB'; Affirms All Other Ratings; Outlook Stable.

NEW YORK -- Constellation Brands, Inc. (STZ) sold $700 million of new 10-year senior notes (new notes) yesterday. The 7.250% new notes were priced at a spread of 245 basis points over treasury to yield 7.389%. The net proceeds are expected to be used to repay bank debt. Upon this new notes issuance, Fitch has affirmed the existing ratings of STZ as follows:

--Issuer Default Rating (IDR) 'BB';

--Bank credit facilities 'BB';

--Senior unsecured notes 'BB';

--Senior subordinated notes 'BB-'.

The new notes lack typical high yield covenants such as debt incurrence and restricted payment tests. From Fitch's perspective, the new notes reduce refinancing risk during the next 10 years and enhance STZ's already adequate financial flexibility. Although the terms of the new notes are not as restrictive as its existing senior notes, Fitch's 'BB' rating for the new notes reflects STZ's improving credit profile.

STZ's contract as an importer for Grupo Modelo S.A. de C.V's (Grupo Modelo) beers, including Corona, for the western U.S. was up for renewal at the end of 2006. On July 17, 2006, STZ announced a joint venture with Grupo Modelo to be consummated on or after Jan. 2, 2007, according to which Grupo Modelo's Mexican beer portfolio will be imported and sold by the joint venture in the entire U.S., including D.C. and Guam. The joint venture may also sell Tsingtao and St. Pauli Girl brands. Fitch believes that the removal of uncertainty regarding renewal of its original contract comprising the western U.S. with Grupo Modelo is credit positive, as is the expanded coverage to the entire U.S. through the joint venture.

STZ's ratings reflect its leading market position and broad portfolio of wine, beer and spirits in diversified global markets. STZ has pursued a strategy of growth through acquisitions financed primarily with debt. Recent acquisitions include BRL Hardy Ltd. for $1.4 billion in 2003, Robert Mondavi Corp. for $1.355 billion in 2004, and Vincor International Inc. (Vincor) for $1.4 billion in June 2006. The company has an excellent track record of integrating acquisitions. It has applied cash flow to support capital expenditures and debt paydown. STZ has generated significant free cash flow in each of the past three years. Operating EBITDA for the last 12 months (LTM), as of May 31, 2006 and pro forma for the Vincor acquisition, was over $900 million.

Pro forma for the Vincor acquisition, repayment of recently matured senior notes, and new notes issuance, STZ's leverage defined as total debt-to-operating EBITDA was 4.6 times (x), while interest coverage was 3.2x, for the LTM ended May 31, 2006. It should be noted that STZ has five-year interest rate swap agreements on $1.2 billion of its floating-rate bank debt that fixes LIBOR at an average rate of 4.1% through fiscal 2010. STZ maintains adequate liquidity through a $500 million revolver, which is expected to have no outstanding balance upon application of net proceeds from the new notes issuance.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.