The Bond Buyer reports:
Chicago's latest rating downgrade paints the city further into a financial corner.
There's more:
Chicago's downgrade and swap termination events spurred comparisons to Detroit, sparked by prior concerns raised over the impact of further downgrades on swaps. In Detroit, which lost its investment-grade status five years ahead of its historic bankruptcy filing, the steady stream of downgrades worsened the city's operations, particularly by triggering termination events on its eight interest-rate swaps.
Stung by repeated downgrades into junk territory starting early 2009, Detroit increasingly struggled to access the market, was forced to pay higher borrowing costs when it did, and forced into years-long negotiations with its swaps counterparties to avoid termination payments.
Ratings analysts starting in 2009 warned that the risk of termination had become another major credit concern for Detroit. The downgrades came faster in 2012, with analysts pushing the city further into junk territory. Those downgrades triggered another termination event on the swaps that the city had renegotiated with counterparties in 2009. Illinois law does not allow for Chapter 9 filings although the governor has proposed creating such a law.
Chicago already pays steep penalties to borrow.
Just a reminder to those extending credit to Chicago.
