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

NEW YORK -- 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.