Chicago nears fiscal free fall with latest downgrade

Reuters/Reuters – The Chicago skyline is seen above a partially frozen Lake Michigan in Chicago, Illinois, January 5, 2015. REUTERS/Jim Young

Things just got a lot more chilly for Chicago after after they drew closer to a fiscal free fall on Friday with a rating downgrade from Moody’s Investors Service that could trigger the immediate termination of four interest-rate swap agreements, costing the city about $58 million and raising the prospect of more broken swaps contracts. The downgrade to Baa2, just two steps above junk, and a warning the rating could fall further still, means the third-biggest U.S. city could face even higher costs in the future if banks choose to terminate other interest-rate hedges against fluctuations in interest rates. All told, Chicago holds swaps contracts covering $2.67 billion in debt, according to a disclosure late last year. FULL REPORT