OREANDA-NEWS. Fitch Ratings has affirmed Arab Tunisian Bank's (ATB) Long-Term Local Currency Issuer Default Rating (IDR) at 'BB+'. The agency has also affirmed ATB's and Arab Tunisian Lease's (ATL) National Long-Term Ratings at 'AA+(tun)' and 'BBB(tun)', respectively. The Outlooks are Negative.

The rating actions follow Fitch's downgrade of Tunisia's Long-Term Local Currency IDR to 'BB-' from 'BB' as a result of which it is now equalised with Tunisia's Long-Term Foreign Currency IDR. This was driven by a change in Fitch's sovereign rating criteria (for more details see 'Fitch Applies Criteria Changes to Tunisia's Ratings' dated 22 July 2016 at www. fitchratings. com).

ATB's Long-Term Foreign Currency IDR and Viability Rating are unaffected by this rating action. A full list of rating actions is at the end of this commentary.

KEY RATING DRIVERS

IDRS, SUPPORT RATING, NATIONAL RATINGS, SENIOR DEBT AND SUBORDINATED DEBT

ATB's IDRs, Support Rating, National and senior debt rating reflect a moderate probability of support from the bank's majority (64.2%) Jordanian shareholder, Arab Bank Plc (AB, BBB-/Negative).

ATB's Long-Term Foreign Currency IDR is capped by Tunisia's Country Ceiling of 'BB' due to transfer and convertibility risks. ATB's Long-Term Local Currency IDR remains at 'BB+', one notch above the 'BB' Long-Term Foreign Currency IDR, reflecting Fitch's view that the sovereign, should it be in default, is less likely to impose restrictions on the bank's ability to service its obligations in the local currency than in the foreign currency. The Negative Outlook on the Long-Term Foreign Currency IDR reflects that on Tunisia's sovereign rating with the corresponding Country Ceiling acting as a cap, while that on the Long-Term Local Currency IDR is driven by the Negative Outlook on AB's Long-Term IDR.

ATB's National Ratings have been affirmed following the recalibration of the National Rating scale for Tunisia. The Negative Outlook on ATB's National Long-Term Rating mirrors that on AB's Long-Term IDR.

ATL's National Ratings reflect a limited probability of support from the institution's ultimate shareholder AB, if needed, through its Tunisian subsidiary, ATB. ATL's capital is 33% held by ATB, which in turn is 64.2%-controlled by AB. ATL's National Ratings have been affirmed following the recalibration of the National Rating scale for Tunisia. The Negative Outlook on ATL's National Long-Term Rating reflects that on AB's Long-Term IDR

The National Rating on ATL's subordinated debt of 'BB(tun)' has also been affirmed. The subordinated debt ratings are notched down by three notches from ATL's National Long-Term Rating to reflect poor recovery prospects on this type of debt in an event of default.

RATING SENSITIVITIES

IDRS, SUPPORT RATING, NATIONAL RATINGS, SENIOR DEBT AND SUBORDINATED DEBT

ATB's IDRs, National ratings, Support Rating and senior debt rating are sensitive to more negative assumptions by Fitch on AB's capacity and willingness to support the bank. The Negative Outlook on AB's Long-Term IDR reflects some residual risks to AB's credit profile arising from the bank's domicile, operations in higher-risk MENA markets, and some remaining uncertainty about the final outcome of a long-standing litigation case.

ATB's Long-Term IDRs are also sensitive to a downward revision of Tunisia's Country Ceiling, which is strongly correlated with sovereign risk.

ATB's Long-Term Foreign Currency IDR is sensitive to a two-notch downgrade of AB's Long-Term IDR, due to Tunisia's Country Ceiling currently acting as a cap. It would be positively affected by an upward revision of Tunisia's Country Ceiling.

ATB's Long-Term Local Currency IDR and Long-Term National Rating are sensitive to a one-notch downgrade of AB's Long-Term IDR. An upgrade of the Long-Term Local Currency IDR and National Long-Term Rating would be contingent on an upgrade of AB's Long-Term IDR, an upgrade of Tunisia's Long-Term Local Currency IDR and an upward revision of Tunisia's Country Ceiling, neither of which are likely in the near term.

The Support Rating would be sensitive to a downgrade of AB's Long-Term IDR by more than two notches.

A significant increase in ATB's stake in ATL and closer integration could lead to an upgrade of the company's National Ratings. An upgrade of AB's Long-Term IDR could also lead to an upgrade of ATL's ratings although this is highly unlikely given the current Negative Outlook on AB's Long-Term IDR. Conversely, ATL's National Ratings could be downgraded if ATB reduces its ownership in ATL, or if AB materially reduces its interests in ATB (and consequently in ATL). A downgrade of AB's Long-Term IDR would also lead to a downgrade of ATL's National Ratings.

The subordinated debt ratings are sensitive to changes in ATL's Long-Term National Ratings.

The rating actions are as follows:

Arab Tunisian Bank

Long-Term Foreign Currency IDR: unaffected at 'BB', Outlook Negative

Short-Term Foreign Currency IDR: unaffected at 'B'

Long-Term Local Currency IDR: affirmed at 'BB+', Outlook Negative

Short-Term Local Currency IDR: affirmed at 'B'

Support Rating: unaffected at '3',

Viability Rating: unaffected at 'b'

National Long-Term rating: affirmed at 'AA+(tun)', Outlook Negative

National Short-Term rating: affirmed at 'F1+(tun)'

National senior unsecured debt: affirmed at 'AA+(tun)'

Arab Tunisian Lease

National Long-Term Rating: affirmed at 'BBB(tun)'; Outlook Negative

National Short-Term Rating: affirmed at 'F3(tun)'

National senior unsecured debt rating: affirmed at 'BBB(tun)'

National subordinated debt rating: affirmed at 'BB(tun)'