New York's fiscal 2009 budget raised the Dormitory Authority of the State of New York's statutory bond cap by $3.25 billion on its state-supported debt programs, according to an analysis of the budget by DASNY released at its monthly board meeting yesterday.

The increased capacity will allow the authority to sell $6.2 billion of bonds to finance projects at the State University of New York, the City University of New York, and for mental health projects in the state's five year capital plan.

The analysis also said that the budget established a $1.29 billion economic initiative program that will be funded with proceeds of bonds issued by DASNY and the Empire State Development Corp.

The state's five-year capital plan for projects at SUNY include $573 million for dorms, $1.61 billion for educational facilities, $450 million for hospitals, and $450 million for community colleges. It also includes $1.42 billion for projects at CUNY's senior colleges and $199.2 million for CUNY community colleges, and $1.5 bilion for mental health.

DASNY was the third largest bond issuer in the nation last year, marketing some $4.64 billion of bonds, according to Thomson Reuters data.

DASNY and ESDC bond sales will be the primary sources for the state's upstate revitalization fund, division of budget spokesman Jeffrey Gordon said in an e-mail. The two authorities will sell an anticipated $660 million to capitalize the $700 million fund. The remaining $40 million of the fund will come from the state's general fund. It wasn't clear at press time whether the upstate fund was part of the $1.29 billion economic initiative program.

DASNY also gave final approval to $170 million of bond transactions on behalf of three institutions and preliminary approval for $791 million of bond transactions on behalf of four institutions.

New York University went to the ratings agencies last week seeking a public rating in anticipation of selling without insurance $690 million of bonds that received preliminary approval yesterday. A final decision whether or not to use insurance has not yet been made.

DASNY director of financing coordination David Kvam said NYU had a "shadow" rating in the past that was used by insurers to price insurance.

"They had no outstanding rating so this is a fairly new undertaking for them," Kvam said. "They let their past 'shadow' rating expire so they are going for a published rating so they can use that to issue bonds."

The university, which has real estate assets in excess of $8 billion, expects to receive a A1 rating from Moody's Investors Service and a A-plus from Standard & Poor's, Kvam said.

The transaction received preliminary approval in November as an insured deal, but came before the board again because downgrades to the credit of many bond insuers and other factors changed the assumptions of the original deal, he said.

The original transaction was also smaller, at $424.3 million. Part of the additional bond proceeds would be used to repay a line of credit the university used to redeem $98.5 million of auction-rate securities. The size of the deal was also increased because some of the university's projects have changed.

The bonds will be sold as fixed-rate taxable or tax exempt bonds with maturities up to 40 years.

The board also gave final approval to a $110 million deal on behalf of the Pratt Institute, a fine art college in Brooklyn that saw interest rates spike by 200 basis points on its Radian Asset Assurance Inc.-insured variable rate demand bonds after Fitch Ratings downgraded the insurer's financial strength rating to A-plus from AA on Sept. 5.

The college is in negotiations with Assured Guaranty Inc. to insure the bonds that would include a refunding to remove the Radian insurance as well as new money for capital projects. Assured proposed a 110 basis point fee on the deal. Negotiations are also in progress for Bank of America NA to provide a direct-pay letter of credit as enhancement.

The debt could be sold as a combination of fixed- and variable-rate bonds and as taxable and tax-exempt with maturities up to 30 years.

George K. Baum & Co. will underwrite the bonds and Nixon Peabody LLP is bond counsel.

Other final approvals yesterday included $41 million for Ithaca College and $19 million for the New York State Rehabilitation Association. Preliminary approvals included $18 million for The Friendly Home, $40 million for Oneida Herkimer Madison Board of Cooperative Educational Services, and $43 million for the College of New Rochelle.

 

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