S&P raises Lebanon credit rating to "B-" from "CCC+"

NEW YORK, Aug 5 (Reuters) - Standard & Poor's said on Tuesday it raised its long-term sovereign credit rating of Lebanon to "B-" from "CCC+" on the easing of tensions between political parties that in May could have driven Lebanon to civil war.

The outlook remains stable.

"The ratings on Lebanon were raised to reflect the easing of tensions between the March 14th coalition, which dominated the government, and the opposition that in May had taken Lebanon to the brink of civil conflict," Standard & Poor's credit analyst Ben Faulks said in a statement.

"The Doha accord, which has delivered the election of a president and the formation of a national unity cabinet, augurs well for Lebanon's immediate political stability.

"This reduces the risk that depositors will withdraw funds from the Lebanese banking sector, which in turn lessens the government's near-term financing risks as banks are by far the government's largest creditors."

Yield spreads between Lebanon's emerging market bonds and U.S. Treasury notes, an important gauge of investors' aversion to risk, tightened 2 basis points to 468 basis points over Treasuries, according to JP Morgan's Emerging Markets Bond Index Global (EMBI-Global)11EML.

So far this year Lebanon's bonds have returned 6.77 percent, according to EMBI-Global.

"The ratings will be lowered should political tensions escalate to the extent that they seem likely to shake the long-documented resilience of depositors in the Lebanese banking sector," S&P said.

"The ratings could be raised if the political compact strengthens to the point where the government begins to make progress in advancing the program of economic reforms pledged at the Paris III conference."

The short-term ratings were affirmed at "C" and the transfer and convertibility assessment was affirmed at "B+". (Editing by Dan Grebler)