S&P raises outlook on Constellation Brands

Standard & Poor's boosts outlook on Constellation Brands, may lift its ratings near term

NEW YORK (AP) -- Standard & Poor's Ratings Services raised Constellation Brands Inc.'s outlook Wednesday and said it may boost the company's ratings near term if it can maintain a solid operating performance and continue to improve credit.

The ratings agency lifted the wine and spirits maker's outlook to "positive" from "stable" and reiterated its ratings, including a "BB-", or junk, corporate credit rating.

"The outlook revision reflects Constellation Brands' good operating performance and improved credit measures, as well as the expectation that the company will be able to maintain its improved financial profile, despite current weak economic conditions which could further slow overall demand for premium alcoholic beverages," credit analyst Jean C. Stout said in a statement.

On Monday, Constellation said it was selling its value spirits business to Sazerac Co. for $274 million in cash and $60 million in debt financing by Constellation Brands at market interest rates. The sale of the unit, which is worth about 5 percent of Constellation's overall sales, includes more than 40 vodka, gin, rum, schnapps, cordial and other liquor brands.

The company said it planned to use the entire net after-tax proceeds of about $210 million to reduce its debt. It also wants to focus on higher-end brands, which bring in bigger margins.

Last week the Fairport, N.Y.-based company said its fiscal third-quarter profit fell 30 percent on restructuring costs and weaker sales. It also cut the top end of its 2009 forecast amid the slowing global economy.

The company's more than 250 brands range from jug wines to California reds, including the Ravenswood, Estancia and Woodbridge by Robert Mondavi labels. It also imports Corona and St. Pauli Girl beer and owns liquors such as Fleischmann's vodka and Black Velvet Canadian whiskey.

Constellation Brands acquired Australian vintner BRL Hardy Ltd. in 2003 in a $1.1 billion cash-and-stock deal that made it the world's largest wine business. It also purchased the U.S. wine business of Fortune Brands Inc. for $885 million in December 2007, boosting its collection of $8-to-$11 wines with popular brands such as Wild Horse.

Shares of Constellation Brands fell 7 cents to $15 in afternoon trading.