OREANDA-NEWS. June 15, 2015. Fitch Ratings has affirmed and assigned the following ratings to the Variable Rate MuniFund Term Preferred Shares (VMTP Shares) and Variable Rate Demand Preferred Shares (VRDP Shares) issued by Nuveen New York Dividend Advantage Municipal Fund (NAN).

Nuveen New York Dividend Advantage Municipal Fund (NAN)
--\\$94,000,000 of VMTP Shares, Series 2017, term redemption on July 1, 2017, affirmed at 'AAA'.;

--\\$89,000,000 of VRDP Shares, Series 1, final mandatory redemption on March 1, 2040, rated 'AAA/F1+'. The liquidity provider is The Toronto-Dominion Bank (TD Bank, 'AA-/F1+').

NAN is managed by Nuveen Fund Advisors, LLC (NFA) and subadvised by Nuveen Asset Management, LLC (NAM). The rating actions are taken in connection with the fund reorganization described below.

KEY RATING DRIVERS

The 'AAA' long-term ratings of the VMTP Shares and VRDP Shares primarily reflect:

--Sufficient asset coverage provided to the preferred shares as calculated per NAN's over-collateralization (OC) tests;
--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern NAN's operations;
--Both the short- and long-term ratings also reflect the capabilities of NFA as investment advisor and NAM as subadvisor.

The 'F1+' short-term ratings of the VRDP Shares of NAN primarily reflect:

--The credit strength of the VRDP Shares' liquidity provider TD Bank ('AA-/F1+');
--The terms and conditions of the VRDP Shares purchase agreements.

FUND REORGANIZATION
Nuveen Investments, Inc. (Nuveen) announced the closing of a fund reorganization on June 8, 2015 whereby target funds Nuveen New York Dividend Advantage Municipal Fund 2 (NXK) and Nuveen New York Performance Plus Municipal Fund, Inc. (NNP) were each reorganized into NAN. As a result of the reorganization, substantially all the assets and liabilities of NXK and NNP have become assets and liabilities of NAN. The reorganization has been approved, as applicable, by the common and preferred shareholders of the acquiring and target funds.

Upon the closing of the reorganization, holders of the VMTP Shares of target fund NXK that were previously rated 'AAA' by Fitch received, for each VMTP Share held immediately prior to the reorganization, one share of a NAN Series 2017 VMTP Shares having substantially the same terms. To finance this exchange, NAN has issued \\$38 million of additional Series 2017 VMTP Shares. Fitch now marks the VMTP Shares of NXK as Paid in Full.

Also upon the closing of the reorganization, holders of the VRDP Shares of target fund NNP that were previously rated 'AAA/F1+' by Fitch received, for each VRDP Share held immediately prior to the reorganization, one share of new NAN Series 1 VRDP Shares having substantially similar terms. Fitch now marks the VRDP Shares of NNP as Paid in Full.

FUND PROFILES
NAN is a closed-end management investment company regulated by the Investment Company Act of 1940. NAN invests in municipal securities that are exempt from regular federal, New York state and New York City income taxes. The fund may invest up to 20% of assets in below investment grade and or unrated securities.

FUND LEVERAGE
As of April 30, 2015, NAN had approximately \\$733 million in assets including the impact of the NXK and NNP acquisition on a pro forma consolidated basis. Total leverage on a pro forma consolidated basis consisted of approximately \\$94 million of VMTP Shares, \\$89 million of VRDP Shares, and \\$72 million of tender option bond obligations.

ASSET COVERAGE
As of April 30, 2015, asset coverage for the total outstanding preferred shares on a post-reorganization pro forma consolidated basis for NAN, as calculated in accordance with the Investment Company Act of 1940, was in excess of the minimum asset coverage of 225% required by the governing documents for the VMTP Shares and VRDP Shares, as applicable.

As of April 30, 2015, the effective leverage ratio for NAN, on a post-reorganization pro forma consolidated basis, was 34.8%. This effective leverage ratio is below the 45% maximum effective leverage ratio allowed by the governing documents of the VMTP Shares and VRDP Shares, as applicable.

STRUCTURAL PROTECTIONS
Compliance with the asset coverage and effective leverage ratio thresholds is tested periodically. In the event of asset coverage declines, the NAN's governing documents requires the fund to reduce leverage in order to restore compliance with the applicable asset coverage test.

Failure to cure a breach of the asset coverage requirement by the allotted cure date results in mandatory preferred share redemption. If NAN is in breach, it must redeem sufficient preferred shares to restore compliance. To facilitate redemption, the fund will deposit sufficient funds with a third-party tender and paying agent.

For the VMTP Shares, an effective leverage ratio breach requires NAN to redeem a sufficient number of preferred shares or reduce the amount of tender option bonds (TOBs) in order to restore compliance. For the VRDP Shares, a breach of the effective leverage ratio is a breach of the fee agreement with the liquidity provider, and, at the option of the liquidity provider, may result in mandatory tender of VRDP Shares for remarketing (see VRDP Purchase Obligation section below for additional details). However, in the event of a breach, Fitch expects NAN to redeem a sufficient number of preferred shares or reduce the amount of tender option bonds (TOBs) in order to restore compliance.

For the asset coverage and effective leverage ratio tests, the total market value exposure periods (i.e. the pre-specified time period allotted for valuation, cure and redemption in the event of a breach) are within the 60 business day guidelines provided in Fitch's criteria.

VRDP PURCHASE OBLIGATION
The short-term rating assigned to the VRDP Shares is directly linked to the short-term creditworthiness of the liquidity provider. The VRDP Shares are supported by a purchase agreement to ensure full and timely payment for all tendered VRDP Shares plus any accumulated and unpaid dividends. The purchase agreement is unconditional and irrevocable.

The VRDP purchase agreement requires the liquidity provider to purchase all VRDP Shares tendered for sale that were not successfully remarketed. The liquidity provider must also purchase all outstanding VRDP Shares if the fund has not obtained an alternate purchase agreement prior to the termination of the purchase agreement being replaced or following the downgrade of the liquidity provider's rating below 'F2' (or equivalent).

The role of the liquidity provider under the fee agreement relating to the purchase obligation has a scheduled termination date. Subsequent to the scheduled termination date, the fee agreement and the VRDP purchase agreement can be extended with the existing liquidity provider, or a new liquidity provider may be selected. Any future changes to the terms of the fee agreement or VRDP purchase agreement or any prospective replacement that weakens the structural protections discussed above may have negative rating implications.

STRESS TESTS
Fitch performed various stress tests on the fund to assess the strength of the structural protections available to the VMTP Shares and VRDP Shares compared to the rating stresses outlined in Fitch's closed-end fund rating criteria. These tests included determining various 'worst case' scenarios where NAN's leverage and portfolio composition migrated to the outer limits of its operating and investment guidelines.

Only under remote circumstances, such as increasing NAN's issuer concentration, while simultaneously migrating the portfolios to a mix of 80% 'BBB', 10+ years to maturity bonds and 20% high yield bonds, did the asset coverage available to the VMTP Shares and VRDP Shares fall below the 'AAA' long-term rating level, and instead passed at an 'AA' long-term rating level.

Given the highly unlikely nature of the stress scenarios, and the minimal rating impact, Fitch views NAN's permitted investments, municipal issuer diversification framework and mandatory deleveraging mechanisms as consistent with an 'AAA' long-term rating.

Short-term ratings assigned to the remarketable VRDP Shares were not subject to the above stress tests as these are linked directly to the short term rating of the liquidity provider.

THE FUND ADVISOR
The investment advisor for NAN is NFA, a subsidiary of Nuveen. NFA is responsible for NAN's overall investment strategies and their implementation. The sub-advisor, NAM, is a subsidiary of NFA that oversees the day-to-day operations of NAN. Nuveen and its affiliates had nearly \\$233 billion of assets under management as of March 31, 2015.

RATING SENSITIVITIES
The ratings assigned to the preferred shares may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of NAN, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause ratings to be lowered by Fitch.

Certain terms relevant to key VRDP Share structural protections, including minimum asset coverage and the effective leverage ratio are set forth in the fee agreement relating to the purchase agreement and are renewed on a periodic basis. Any future changes to these terms that weaken the structural protections may have negative rating implications.

The short-term rating assigned to the VRDP Shares may also be sensitive to changes in the financial condition of the liquidity providers. A downgrade of a liquidity provider to 'F2' would result in a downgrade of the short-term ratings of the VRDP Shares to 'F2,' absent other mitigants. A downgrade below 'F2', on the other hand, would not necessarily result in a downgrade of the short-term rating of the VRDP Shares, given the features in the transactions that would result in a mandatory tender of the VRDP Shares for remarketing, or purchase by the liquidity provider in the event of a failed remarketing.

NAN has the ability to assume economic leverage through derivative transactions which may not be captured by the minimum asset coverage test or effective leverage ratio. NAN does not currently engage in speculative derivative activities and does not envision engaging in material amounts of such activity in the future. In fact, such activity is limited by NAN's investment guidelines and could run counter to its investment objectives of achieving tax-exempt income. Material derivative exposure in the future could have potential negative rating implications if it adversely affects asset coverage available to rated preferred shares.