Yields on American Airlines' tax-free debt jump

(Reuters) - Tax-free bonds sold on behalf of American Airlines took a hit in the U.S. municipal bond market in the wake of the carrier's bankruptcy filing on Tuesday.

Yields on some of the $800 million of secured special facility revenue bonds sold through the New York City Industrial Development Agency on behalf of the airline for a project at John F. Kennedy International Airport in 2005 shot up to as high as 11 percent in secondary market trading on, according to trading information from Municipal Market Data. Yields had been in the 8 percent range earlier this month and in late October.

Yields on nearly $109 million of unsecured debt issued in 2007 for the airline by Chicago's O'Hare International Airport, which were in the 7.9 percent range in late September, have been climbing since mid-November; they topped 15.4 percent on Tuesday.

The airline had about $1.6 billion of tax-exempt debt due through 2036 outstanding at the end of 2010, according to a regulatory filing.

Special facility revenue bonds are issued by airports or governmental agencies to finance projects specific to an individual airline, such as terminals, hangars and maintenance facilities.

The bonds, which are paid off solely by the airline, plummeted in popularity after United Airlines defaulted on $1.1 billion of the debt when it filed for bankruptcy protection in 2002.

(Reporting by Karen Pierog in Chicago; Editing by Leslie Adler)