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UPDATE 1-Fitch downgrades Chicago but keeps investment-grade rating
May 15, 2015 / 7:42 PM / 3 years ago

UPDATE 1-Fitch downgrades Chicago but keeps investment-grade rating

(Recasts, adds background)

May 15 (Reuters) - Fitch Ratings cut Chicago’s debt one notch to ‘BBB+’ on Friday, ending a tumultuous week of downgrades for the Illinois city but leaving intact a disparity among Wall Street credit rating agencies that has confused investors trying to value their bonds.

Moody’s Investors Service dropped the city to junk on Tuesday. Standard & Poor’s Ratings Services also downgraded the city this week to ‘A-', which leaves a split among rating agencies: only Moody’s believes the Windy City’s $8.1 billion of unlimited tax general obligation debt is below investment grade.

The credit disparity has prompted price discovery in the municipal market.

A $1 million block of the city’s general obligation school construction bonds sold at an all-time low on Friday, dropping to 99.05 cents on the dollar from the last time the bonds traded in October at 108.031.

The downgrades came after last week’s ruling by the Illinois Supreme Court, which overturned the state’s pension reform law. That decision narrowed Chicago’s ability to curb its own $20 billion unfunded pension liability, Moody’s said.

Senior Obama administration officials have been briefed on the financial situation in Chicago, the White House said on Friday. (Reporting by Hilary Russ in New York; Additional reporting by Kanika Sikka in Bengaluru; Editing by Andrew Hay)

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