March 5 (Bloomberg) — Chicago's credit rating on $7.8 billion of general-obligation debt was cut one level to Baa1 by Moody's Investors Service, which cited "massive" pension liabilities for the third-most populous U.S. city.
The reduction, on the 177th anniversary of Chicago's incorporation, follows a three-step downgrade in July for the city of 2.7 million. The outlook remains negative, meaning the rating may be lowered further.
The decline to three levels above junk "reflects the city's massive and growing unfunded pension liabilities, which threaten the city's fiscal solvency," Matthew Butler, a Moody's analyst, said yesterday in a report. "The size of Chicago's unfunded pension liabilities makes it an extreme outlier."
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