Doral Called ‘Significantly Undercapitalized’ by FDICElizabeth Dexheimer
Doral Financial Corp., the Puerto Rico bank that lost more than half its value this year, tumbled 24 percent after U.S. regulators found it to be “significantly undercapitalized” and in need of an immediate fix.
The Federal Deposit Insurance Corp. downgraded Doral from an earlier finding of “undercapitalized,” the San Juan-based company said today in a regulatory filing. The bank must “immediately” increase capital to the minimums required in a 2012 consent order or submit a contingency plan for the sale, merger or liquidation of the bank, according to the filing.
Doral said earlier this year it was revising its capital plan after the FDIC said it may no longer include Puerto Rican tax receivables in its calculation of Tier 1 capital. The bank is trying to recover taxes paid on overstated earnings, and is pressing a San Juan judge for a tax refund of about $230 million the government has refused to pay.
The bank sold some residential and commercial assets for $16.7 million, and has ready access to about $1 billion of liquid assets, which is adequate to continue operations, the company said. Doral is “updating its capital plan and contingency plan to reflect the recent series of asset sales and status of its litigation against the government of Puerto Rico,” the bank said in a statement.
Doral fell $1.60 to close at $5.04 in New York, the biggest percentage drop since May 2. The shares have slid 68 percent this year.
Doral and Puerto Rico agreed in 2012 that the company was entitled to the refund as a result of a restatement of earnings from 1998 to 2004. Puerto Rico’s Treasury later voided the deal, claiming Doral obtained it through fraud.
After settlement negotiations between the bank and government broke down, Puerto Rico’s Court of First Instance scheduled a trial starting last month.