OREANDA-NEWS. Fitch Ratings has revised Bahrain Mumtalakat Holding Company's (Mumtalakat) Outlook to Negative from Stable and affirmed the Long-term Issuer Default Raing (IDR) and senior unsecured rating at 'BBB-'.

The rating of Mumtalakat's MYR300m notes due 2017, EMTN programme, and USD600m Sukuk certificates due 2021 issued under Mumtalakat Sukuk Holding Company, are affirmed at 'BBB-'. Fitch has also affirmed Mumtalakat's Short-term IDR at 'F3'.

The rating actions follow Fitch's revision of Bahrain's Outlook to Negative from Stable and the affirmation of its Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BBB-' and 'BBB', respectively on 4 December 2015 (see 'Fitch Revises Bahrain's Outlook to Negative, Affirms at 'BBB-' at www.fitchratings.com).

KEY RATING DRIVERS
State Support
Mumtalakat's ratings factor in implicit state support, although this is subject to change given the political uncertainty in Bahrain. Mumtalakat is 100%-owned by the Bahrain state and is the government's investment arm. It was established in June 2006 as an independent holding company for the government's non-oil and gas assets. The viability of Mumtalakat's business model is dependent on continued strong linkages with the sovereign, its strategic importance as a holding company for the government's non-oil and gas assets, and its low leverage relative to Bahrain's financial capacity.

In line with Fitch's "Parent and Subsidiary Rating Linkage" methodology, Mumtalakat's ratings are aligned with the Kingdom of Bahrain's (BBB-/Negative/F3), reflecting their strong relationship.
State Development Strategy
Mumtalakat is an active investor on behalf of the state in diverse industry sectors spanning over 35 commercial enterprises, nationally and internationally.

State Funding
Mumtalakat has received government shares in state-owned enterprises since its inception, as well as funds and free land to manage and operate its subsidiaries. Although government support falls short of an explicit debt guarantee, Fitch considers Mumtalakat's high profile and strategic role to mean that support would be provided, if needed.

KEY ASSUMPTIONS
Not applicable

RATING SENSITIVITIES
Future developments that may, individually or collectively, lead to positive or negative rating actions include:
- A change in Bahrain's sovereign ratings, would likely lead to a change in Mumtalakat's ratings. Any further sovereign downgrade would result in Fitch reassessing the current alignment of the parent and subsidiary's ratings. This may result in multiple notching down of Mumtalakat's rating from the sovereign's rating, reflecting the reassessment of the sovereign's capacity to provide support under an adverse scenario.
- Any adverse change in the implied support of, commitment from, and ownership by the Bahrain government.
- Substantial new debt on behalf of Mumtalakat subsidiaries or further guarantee of subsidiaries' debt.

For the sovereign rating of Bahrain, Fitch outlined the following sensitivities in its rating action commentary of 4 December 2015:
The main factors that could lead to a downgrade are:
- Failure to reduce the fiscal deficit sufficient to stabilise the government debt-to-GDP ratio.
- Severe deterioration of the domestic security situation.

The rating Outlook is Negative. Consequently, Fitch does not currently anticipate developments with a material likelihood of leading to an upgrade. However, the following factors could lead to positive rating action:
- Implementation of fiscal measures which reduce the budget deficit and are consistent with the stabilisation and then decline of the government debt-to-GDP ratio in the medium term.
- A broadly accepted political solution that eases political unrest.
- A recovery in oil prices that improves public finances.