Moody's downgrades Chicago debt to 'junk' with negative outlook

Moody's cuts Chicago credit rating to 'junk'
Moody's cuts Chicago credit rating to 'junk'   

Moody's downgraded Chicago's credit rating down to junk level "Ba1" from "Baa2."

The announcement, which the ratings agency released Tuesday afternoon, cited a recent Illinois court ruling voiding state pension reforms. Moody's said it saw a negative outlook for the city's credit.

Following that May court decision, Moody's said it believes that "the city's options for curbing growth in its own unfunded pension liabilities have narrowed considerably."

Read MoreMunicipal money matters: Why Chicago is not the next Detroit

"Whether or not the current statutes that govern Chicago's pension plans stand, we expect the costs of servicing Chicago's unfunded liabilities will grow, placing significant strain on the city's financial operations absent commensurate growth in revenue and/or reductions in other expenditures," the agency said in a release.

The downgrade affected $8.9 billion of general obligation, sales, and motor fuel tax debt, according to Moody's.

The firm said its downgrades could trigger up to $2.2 billion in accelerated payments on Chicago debt.

—Reuters contributed to this report.

Obama Pres Library to open in Chicago
Obama Pres Library to open in Chicago