The Dormitory Authority of the State of New York yesterday approved up to $1.27 billion of refundings of state-backed debt and took actions to deal with the downgrade of a liquidity provider used by some of its conduit borrowers.

The monthly board meeting was the first chaired by Alfonso L. Carney Jr., who was quickly confirmed by the state Senate after Gov. David Paterson appointed him this month.

The largest deal approved was a refunding of up to $795 million of state-backed service contract bonds. Most of the debt, $610 million, was issued by DASNY, but the refunding includes $13.7 million of bonds issued by the Empire State Development Corp. and $159 million of bonds issued in 1997 by the New York State Housing Finance Agency. Though issuers of state-backed debt have been able to refund on behalf of other issuers of state-backed debt since 2007, it has not been done frequently. The first such deal was done by the ESDC in 2007, and this is DASNY's second.

"We expect to maximize savings by creating economies of scale," Marc Violette, a DASNY spokesman, said in an e-mail. The financing team was not announced.

The authority also approved the sale of up to $470 million of personal income tax bonds, so-called PIT bonds, to refinance bonds that were issued in 2003 on its mental health service facilities improvement credit.

The current-year budget authorized the state to sell bonds for mental health facilities on its higher rated-PIT credit in order to both get a more favorable yield on new money bonds, as well as to deal with expiring liquidity facilities on outstanding variable-rate debt.

"We're not doing this for economic savings," Violette said. "We're moving out of variable rates into fixed rates, and we're doing it to eliminate the need for liquidity facilities at a time when liquidity facilities are limited."

Standard & Poor's rates New York's PIT credit AAA, citing a stronger pledge on the personal income tax compared to the mental health bonds, which it rates AA-minus.

Fitch Ratings assigns its AA-minus to the state's PIT credit and A-plus to the mental health bonds. Moody's Investors Service does not rate new PIT issues.

JPMorgan and Samuel A. Ramirez & Co. will lead manage the deal. Hawkins Delafield & Wood LLP is bond counsel.

The authority also took actions to deal with interest rate spikes seen by five higher education borrowers that have liquidity provided by RBS Citizens.

Standard & Poor's downgraded RBS Citizens' counterparty ratings to A-minus/A-2 with negative outlooks, from A/A-1, on March 23. Interest rates on variable-rate bonds issued by DASNY on behalf of St. Lawrence University, Ithaca College, the College of New Rochelle, St. John Fisher College, and Long Island University that had RBS Citizens' liquidity spiked immediately.

St. Lawrence's experience was typical, with yields jumping to 3.1% on March 26 from 0.47% on March 19. The authority gave St. Lawrence final approval to refinance $46.8 million of bonds to remove the RBS Citizens letter of credit. Ithaca College received preliminary approval to do the same.

The other three borrowers will take a different route, wrapping their bonds with a Federal Home Loan Bank confirming letter of credit.

Other financings approved by the board included final approval for $18.25 million of bonds on behalf of Nassau County BOCES, as well as preliminary approvals for $491.1 million of bonds on behalf of North Shore Long Island Jewish Medical Center, $140 million for the University of Rochester, and $17.9 million on behalf of United Memorial Center Obligated Group.

DASNY also yesterday approved new guidelines intended to increase the participation of minority and women-owned law firms at the authority.

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