DASNY OKs $776M, Backs Boosting Role of Minorities, Women

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The Dormitory Authority of the State of New York yesterday gave final approval to issue $776 million of bonds and preliminary approval for another $600 million of bonds. DASNY's board also adopted the recommendations by a state commission to increase participation of minority- and women-owned underwriting firms in the issuance of state-backed debt.

The largest final bond approval was for up to $600 million of personal income tax bonds. Falling state revenue caused by the weak economy is projected to erode debt service coverage of the state's PIT bonds over the next two years, DASNY staff said.

The state projects its current 6.6 times debt service coverage ratio will decline to 5 times in the next fiscal year, which begins on April 1, and will further decline in fiscal 2011 to 4.4 times, according to a DASNY staff report.

The bond proceeds would be used to fund economic development grants and to reimburse the state's general fund for grants awarded to health care providers that directly or indirectly incurred costs associated with the so-called Berger Commission report, which mandated downsizings, closures, and mergers of health care facilities.

The board adopted all of the 30 recommendations made by the Minority and Women-Owned Business Enterprise Task Force in October, including creating a uniform request for proposals template among issuers of state-backed debt, creating a centralized performance review system and setting a target of 20% participation by so-called MWBE firms.

The New York State Housing Finance Agency yesterday also adopted the recommendations at its monthly board meeting. The New York State Thruway Authority expects to adopt them in January, the New York State Environmental Facilities Corp. may consider them next week, and the Empire State Development Corp. expects to adopt them at a future board meeting.

The task force, which was created by Gov. David Paterson in June, is expected to approve a template for requests for proposals at a meeting on Monday, according to officials with knowledge of the matter. The task force recommended a universal RFP that would make the process more standard among the state's five issuers of PIT bonds.

DASNY executive director Paul Williams Jr., chairs the task force that will next look at increasing MWBE participation as bond counsel and financial advisers.

The authority is also working on legislation that could be introduced by the governor in the next legislative session. Under consideration is the creation of a DASNY subsidiary that would be able to issue debt for nonprofits that don't have ratings high enough to borrow through the agency under its current guidelines, Williams said.

The authority board gave final approval on five financings, including the PIT bonds. Teachers College in Manhattan plans to use the proceeds of $55 million of bonds to refund $44.5 million of auction-rate securities insured by MBIA Insurance Corp. issued by DASNY for the school in 2007. Those ARS failed at auction in February, resetting to a 15% interest rate

In May, the college used a line of credit from JPMorgan Chase to purchase the ARS with the intention of converting them under existing documents at a later date. The line of credit expires in two months and the college decided to refund them instead.

The deal will also include up to $6 million of new money for various capital improvements. Nixon Peabody LLP is bond counsel and Morgan Stanley is lead manage the sale of the bonds, which will have maturities of up to 30 years.

DASNY modified previously approved financings for two borrowers. Wagner College plans to use the proceeds of $45 million of bonds to build a new student dormitory and to refund $14 million of outstanding bonds insured by ACA Capital. The refunding had not been part of the transaction first approved for the Staten Island College in July. Le Moyne College in Syracuse added $8 million of refunding to a previously approved transaction that will total $21 million.

The board also revised a previously approved restructuring of variable-rate debt issued in 2003 under a program for state and voluntary agency mental-hygiene projects to allow $55 million of debt to be refinanced as taxable bonds. The state decided it needed to convert some of the debt to taxable because it was sold in relation to certain properties that could potentially be sold to the private sector in the future and would no longer qualify for tax-exempt status.

The board also gave initial approval for $100 million of bonds to be sold on behalf of the Hospital for Special Surgery, $375 million for Cornell University, and $125 million for Yeshiva University.

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