Moody’s affirms Constellation Brands

Moody's Investors Service said it affirmed Constellation Brands Inc.'s Baa3/Prime-3 ratings following the announcement that it will increase its investment in Canopy Growth Corp. to 40% for about $4 billion.

The outlook is stable.

The agency said the affirmation is based on a view that despite the large and speculative nature of the investment, leverage can be restored to a more appropriate level for the rating within 18 to 24 months, based on Constellation's cash flows alone.

"Constellation's investment in Canopy is a large bet at a very rich price, which can only be justified if the company proves that it can benefit from the changing environment for cannabis in Canada and beyond," Linda Montag, Moody's senior vice president, said in a news release.

"Constellation's acquisition appetite has long been a rating consideration, but the deviation from its core beverage alcohol business into an entirely new space introduces potential new risks along with opportunities."

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