Following Sunday’s bailout of Bear Stearns Companies Inc. by J.P. Morgan Chase & Co., Fitch Ratings has affirmed the ratings of J.P. Morgan, upgraded the long-term issuer default ratings for Bear, and placed its other ratings on rating watch positive.

At close of the transaction, Fitch indicates that Bear’s debt ratings will be upgraded and leveled with those of J.P. Morgan.

“This upgrade acknowledges J.P. Morgan’s guarantee of all trading obligations and counterparty transactions of Bear and its subsidiaries and J.P. Morgan management’s assumption of operational oversight, both effective immediately,” it explains.

Fitch has also downgraded Bear’s individual rating, a retrospective move reflecting Fitch’s opinion that Bear would have been unable to meet its obligations, if support had not been forthcoming. This rating will be in place for a short period of time, once clarity is achieved regarding the new ownership arrangement’s impact on Bear’s financial profile, management and business model, Fitch will re-rate Bear and the individual rating will rise again.

The affirmation of J.P. Morgan’s ratings reflects Fitch’s belief that the transaction as structured does not significantly increase J.P. Morgan’s risk profile nor materially dilute its capital structure or liquidity position. It notes that the price for Bear represents a substantial discount to book value, which is designed to buffer the risks that J.P. Morgan will be assuming, including potential litigation risk and expenses associated with integrating systems and businesses.

Fitch adds that a number of Bear’s core businesses are complimentary to J.P. Morgan’s existing investment banking business, particularly its large, profitable clearing and prime brokerage operations. The transaction is expected to be immediately accretive to J.P. Morgan’s earnings.