Richard Lehmann, publisher of Distressed Debt Securities newsletter in Miami Lakes, Florida, calculates 2011 defaults at $24 billion worth of bonds, up from about $5 billion in 2010. He includes missed payments and times when borrowers used reserves to pay, plus tax-exempt airport-improvement debt tied to AMR's bankruptcy and muni bonds backed by tobacco-company revenue.

That measure of defaults may be at least as high or more in 2012, said Lehmann. He predicts half the $113.8 billion of tobacco bonds outstanding may default if "they have to invade debt reserves."

Smaller Payments

The bonds are backed by payments from cigarette makers to state and local governments to settle suits over smoking-related health-care costs. Lehmann said the payments, linked to tobacco consumption, have fallen as people quit smoking and cigarette companies withheld money in challenges to the terms of the settlements.

Ohio, California and Virginia had to make payments on tobacco bonds from reserves in 2011, said Lehmann.

Other risks facing the municipal market this year are a possible Detroit bankruptcy, a slowdown in China, a collapse of the European currency union and the looming expiration of U.S. tax cuts, Fabian of Municipal Market Advisors said by e-mail.

"It's a much-less-predictable year than ever," he said.

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