"This year, the fundamental credit cycle in the muni market is positive, not negative—there have actually been more upgrades than downgrades," he noted. "Detroit was a blip on the radar screen and Chicago will be as well. [Chicago] has a structural imbalance and this is more like a collateral damage [following] the downgrade in Illinois [in June]."
(Read more: Banker: Goes without saying Detroit must cut pensions)
Illinois was slapped with an A- rating by Fitch with a negative outlook in June, affecting $27.5 billion of outstanding debt. Even before the downgrade, Illinois had one of the lowest credit ratings in the nation as the state struggled with a nearly $100 billion unfunded pension liability. The agency warned that Illinois' lower rating could be in further jeopardy if the state does not take action to stabilize its finances.
"It's possible to see another downgrade in Chicago—but we believe they are not going to go below investment grade," said DiMella. "We believe they have the revenue they need and once they figure out investment for pensions, you'll see stability again."
In October, Chicago Mayor Rahm Emanuel called for pension reforms, proposing a spending plan for the third-largest city including a hike in the cigarette tax, higher zoning permit fees for big developments and an end to some retirees' health insurance.
"A bankruptcy filing in Chicago? Anything's possible," said Cohen. "Unless they get their act together, [problems] will compound and they won't be able to handle it. Rahm Emanuel is a smart guy—he needs to stop letting unions pull him by the nose ring!"
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
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