S&P raises Bear Stearns rating on new JPMorgan offer

NEW YORK (Reuters) - Standard & Poor's on Monday raised its rating on Bear Stearns, citing a strengthened guarantee of the investment bank's trading obligations under a new takeover offer by JPMorgan Chase.

The upgrade came after JPMorgan raised its offer for Bear Stearns Cos to about $10 a share, roughly five times its original bid, in a move to appease disgruntled shareholders.

Under the revised deal, JPMorgan will be allowed to buy 95 million newly issued Bear Stearns shares, giving it a 39.5 percent stake in Bear Stearns, in reach of a majority stockholding.

JPMorgan also said it had significantly expanded its guaranty of Bear Stearns' trading obligations and also agreed to guarantee Bear Stearns' borrowings from the Federal Reserve Bank of New York.

"The price increase and the anticipated increase in the amount of shares controlled by JPMorgan raise the probability that the deal will be completed," S&P said in a statement. "On its own, Bear Stearns' viability is uncertain."

S&P said it put Bear Stearns' rating and outlook on par with JPMorgan's in light of the guaranty and expectations that Bear Stearns' debt will be assumed by JPMorgan.

It raised Bear Stearns' counterparty credit and senior unsecured ratings by five notches to "AA-minus" from "BBB" with a stable outlook. Counterparty ratings reflect how well a company can meet its financial obligations with customers, trading partners or other parties.

(Reporting by Dena Aubin; Editing by Tom Hals)