The Federal Deposit Insurance Corp. announced that The Office of the Commissioner of Financial Institutions of Puerto Rico has shut down Doral Bank in San Juan. The FDIC is now the bank’s receiver. Many investors have lost money through the Puerto Rico Conservation Trust Fund.
Banco Popular de Puerto Rico has now purchased $3.25 billion of Doral’s assets to acquire the defunct bank’s operations, including its deposits. A day after Doral shuttered its doors, 26 of its former branches reopened. Eight of them are now run by Banco Popular (OTCMKTS: BPESY), which resold the other 18 branches and their deposits to FirstBank Puerto Rico, Banco Popular North America, and Centennial Bank. The latter two now run Doral’s U.S. branches.
Doral Bank had approximately $5.9 billion in overall assets and $4.1 billion in deposits ending in 2014. Regulators determined that it was “critically under-capitalized.” After the FDIC notified the bank that it wouldn’t be able to use a $229 million tax refund for its Tier 1 capital, it was unable to raise more capital.
On Friday, Doral’s shares dropped 46% after the FDIC released information of the bank’s shuttering by accident before stock markets had closed.
Banco Popular purchased $3.25 billion of Doral assets, paying a 1.49% premium to the FDIC for the bank deposits. The FDIC also arrived at two other agreements, allowing it to sell $1.3 billion of the assets to other parties. The rest of the assets will be kept for disposition later.
Fitch Ratings has since downgraded Doral Bank’s long-term Issuer Default Rating (IDR) from ‘C’ to ‘D’ in the wake of the shutdown/receivership news. It is giving the bank a ‘F’ Viability Rating, which indicates that regulatory intervention was involved.
Doral Financial Corp. (DRL), which is Doral Bank’s parent company, got a ‘D’ rating, which is also a downgrade. Fitch thinks Doral Financial will default or file for bankruptcy soon since its ability to meet its financial duties has been hurt by the bank’s seizure.
Our Puerto Rico investment fraud lawyers represent investors on the mainland and the islands who have sustained losses from Puerto Rico municipal bonds. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.
Doral Bank’s Struggles End, CFO, March 2, 2015
The Big Winners in Doral’s Failure, The American Banker, March 5, 2015
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