Fitch to Upgrade DASNY Upstate Community Colleges Revs, 2005C to 'AA+'; Confirms...

Fitch to Upgrade DASNY Upstate Community Colleges Revs, 2005C to 'AA+'; Confirms 'F1+'

NEW YORK--(Business Wire)--
Effective Sept. 11, 2008, Fitch Ratings will upgrade the long-term
rating to 'AA+' and confirm the short-term 'F1+' rating assigned to
the Dormitory Authority of the State of New York (DASNY) upstate
community colleges revenue bonds, series 2005C (the bonds). Currently,
$54,080,000 of bonds are outstanding. The rating actions are being
taken in connection with the addition of an irrevocable, direct-pay
letter of credit (LOC); the termination of the municipal bond
insurance policy provided by CIFG Assurance North America, Inc.; the
termination of the standby bond purchase agreement provided by DEPFA
BANK plc, acting through its New York Branch (DEPFA); and the
reoffering of the bonds in a weekly rate mode. On Sept. 11, 2008, the
scheduled effective date, the rating on the bonds will be based on the
support of the direct-pay LOC provided by DEPFA and the application of
Fitch's joint probability methodology. The upgrade in the long-term
rating to 'AA+' will be based jointly on the underlying rating
assigned to the bonds (currently rated 'A+' by Fitch), issued by
DASNY, and the support provided by the direct-pay LOC issued by DEPFA
(currently rated 'AA-/F1+'), securing the bonds. The short-term 'F1+'
rating is based solely on the LOC.

The long-term 'AA+' rating is based on Fitch's methodology which
considers the joint probability of the failure of both a rated obligor
and a bank LOC provider. The methodology results in a rating that is
up to two notches higher than the stronger of the two credits if the
following conditions are met: (1) both entities have a rating of 'A'
or higher; (2) the transaction is structured such that payments from
both the municipal issuer and the bank are in the flow of funds and
both entities would have to fail to perform before the bonds
defaulted; and (3) the credit of the bank and the rated obligor have
no more than a medium degree of correlation. In this instance, Fitch
has determined that there is a low degree of correlation which results
in a rating of 'AA+'. If either DEPFA or the bonds were downgraded to
'A-' or lower, the joint probability could no longer be applied and
the long-term rating would then reflect the higher of the two ratings.

The rating will expire upon the earliest of: Sept. 10, 2009, the
stated expiration date of the LOC, unless such date is extended; any
prior termination of the LOC; and defeasance of the bonds. The LOC
provides full coverage of principal plus an amount equal to 55 days'
interest at a maximum rate of 12%, based on a 365-day year and
purchase price for tendered bonds. The Remarketing Agent for the bonds
is Goldman, Sachs & Co.

Following the reoffering, the bonds will bear interest in a weekly
interest rate mode, but may be converted in part or in whole to a
daily rate, flexible rate, auction rate, special auction rate,
long-term rate, or fixed rate mode. While the bonds bear interest in a
weekly or daily interest rate mode, interest payments are the first
business day of each month, commencing Oct. 1, 2008. Bondholders may
tender their bonds on any business day with the required prior notice
to the tender agent.

The bonds are subject to mandatory tender on: (1) any conversion
date (except a conversion between the daily and weekly modes); (2) any
date upon which an alternate LOC is substituted for the LOC then in
effect; (3) the fifth business day prior to the stated expiration date
of the LOC; (4) a business day not later than the fifth business day
following the receipt by the trustee of a 'notice of termination' or
'notice of non-reinstatement' as such terms are defined in the
reimbursement agreement; and (5) for series 2005C bonds in the daily
or weekly mode, any business day specified by DASNY in a notice to the
trustee not less than 20 days after the trustee's receipt of such
notice. Optional and mandatory redemption provisions also apply to the
bonds.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Trudy Zibit, +1-212-908-0689
(for information on the bonds)
Laura Porter, +1-212-908-0575 (New York)
(for information on DASNY)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)

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