In Branson, Mo., the strains of country music soar over 40 stages, but the financing plans for southwest Missouri's newest airport have hit some turbulence.

Early this month, Branson Airport, a for-profit company that includes a charter jet service, dipped into reserves to make payments on part of the $113 million in tax-free municipal bonds used to finance the airport, which opened in May 2009. That means the bonds are in technical default, and their value on the secondary market reflects investor concerns over the new airport's ability to generate revenue in a recession.

The Branson/Lakes Area Convention and Visitors Bureau web site markets the city as the live music show capital of the world, and the new airport was designed, in part, to allow music fans to land right next to Branson, rather than 50 miles north in Springfield.

"They kind of had a build-it-and-they-will-come mentality," says Mitchell Savader, chief executive of Savader Asset Advisors, a New York investment firm that specializes in municipal bonds. "They built it and haven't gotten the kind of demand they expected for the project."

Filings with the Municipal Securities Rulemaking Board show the airport expected $12.3 million in revenue for 2010, but recorded only about $600,000 for the first three months of the year.

Visitor numbers for 2009 dropped 3.8% from 2008, according to the Branson Lakes Chamber of Commerce. Revenues from the Branson Convention Center slid 14.5% in the same period.

David Jones, project management coordinator for the new airport, says the airport can make up for its slow start as more airlines add flights.

"Airlines were having a very difficult time in 2009, and it was one of the worst years in industry history," he says. "The whole process has moved back a year from what we'd originally hoped."

There are signs of improvement on the horizon, as AirTran Airways (AAI) this spring added a third flight from Atlanta. Denver-based Frontier Airlines, a subsidiary of Republic Airways Holdings (RJET), expanded its service to Branson earlier this month.

"We started off with a four-hub strategy, and we've now got two out of the four," Jones says. He says talks with airlines in Chicago and Atlanta are continuing, and that current flights have been full enough to satisfy operational projections.

The bond market, though, has had some misgivings. One set of bonds in the financing series, a 2007 unrated $9.8 million issue that originally sold at 99.31 cents on the dollar with a 7.0% yield, last traded in June at 54 cents with an 11.6% yield, according to the latest MSRB data.

Branson Airport will be meeting with bondholders early next month to address concerns, Jones said. As revenues increase, Branson Airport will replenish its reserves and allay bondholder concerns.

"We'd like them to see that Branson is proving to be a viable air service destination," he says.

Savader says the Branson bonds are typical of the universe of troubled municipal debt.

"The problems in the muni sector aren't going to be so much the general obligation securities issued by cities, counties and towns," he says. "The problems are going to be with projects particularly affected by the economic problems of the last few years. This one has been pointedly affected by the economy."