CHICAGO (Reuters) - Chicago's rating downgrade to Baa2 by Moody's Investors Service on Friday could terminate four interest-rate swap agreements, costing the city about $58 million, according to the credit rating agency.
The swaps, which the city uses to hedge interest-rate risk on its variable-rate bonds, can be ended by bank counterparties if Chicago's credit ratings fall below a specified level. Moody's also noted that the downgrade to Baa2, two notches above the junk level, moves the city closer to additional termination triggers included in other interest-rate swap agreements.
It added that Chicago can cover the initial termination payment.
"The city's available liquidity is more than sufficient to cover these termination costs," Moody's said in a report.
(Reporting by Karen Pierog; Editing by Phil Berlowitz)
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