Chicago Junk Bond Downgrade

Chicago’s Credit Rating Takes a Beating, Moody’s Downgrades to Just Above Junk

RT, March 5, 2014

Moody’s Investor Services has downgraded Chicago’s credit rating to the third-lowest level above “non-investment grade” based on pension liabilities, meaning the third-largest US municipality has the second-lowest credit score among major cities.

The agency announced Tuesday it was dropping Chicago’s rating on around $8 billion in debt by one level–from A3 to Baa1. The move follows a three-step downgrade for the city in July.

Dropping Chicago’s rating to three levels above junk-bond status “reflects the city’s massive and growing unfunded pension liabilities, which threaten the city’s fiscal solvency,” Moody’s analyst Matthew Butler said in a report on Tuesday. “The size of Chicago’s unfunded pension liabilities makes it an extreme outlier.”