The city of Chicago's credit rating has been downgraded to junk status by Moody's Investors Service.
The two-level drop, from Ba1 to Baa2, came just days after the Illinois Supreme Court rejected a plan to overhaul the state's pension system, The New York Times reports
Mayor Rahm Emanuel called the move by Moody's premature.
"While Chicago's financial crisis is very real and at our doorsteps, today's irresponsible decision by Moody's to downgrade the city's credit by two steps goes far beyond that reality," the mayor said.
The downgrade likely will make it harder for Chicago to borrow money. And though Fitch Ratings and Standard & Poor's Financial Services have not said whether they will follow suit, such a move is likely, Crain's Chicago Business reports
If that happens, the city could "spiral downward" financially, Crain's said, and the city could be forced to raise $500 million quickly if lenders demand their money immediately.
Moody's downgrade applies to $8.91 billion of the city's debt, which includes $8.1 billion of general obligation bonds, Crain's reported. The action also likely means a downgrade for Chicago Public Schools.
A report by The Bond Buyer
, which keeps an eye on the municipal finance market, indicates Chicago is the only major city in the U.S. to be demoted to a junk bond rating by Moody's. Cities such as Pittsburgh were downgraded to Ba1 a decade ago, Bond Buyer reports.
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