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Doral Financial Scores Big Supreme Court Win

  +Follow June 9, 2014 2:27PM
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It’s been a dramatic couple of weeks for Puerto Rican lender Doral Financial (DRL) , who have experienced extreme whipsaw action as the company’s immediate future at any given point, be it insolvency or full financial recovery, changes by the day.

The fortunes took a turn for the better when the Puerto Rican Supreme Court made a crucial decision in Doral’s favor, opening the doors fort a major payout that could reverse the bank’s slide towards insolvency.  

Doral Seeks to Shore Up Capital

In early 2014 Doral had been discovered to be using improper assets to satisfy their Tier 1 capital requirements.  After this discovery, the bank scrambled to find a capital injection to stabilize the bank’s assets, as Moody’s, Fitch, and the S&P all downgraded the bank in response.

This put Doral in a very problematic situation. In the aftermath of the 2008 financial meltdown, banks were forced to have the capital required to pass more stringent stress tests to assure they could withstand financial catastrophe. In short, Doral needed money.

 It appeared Doral had found their savior in their own home government, who they claimed owed Doral a whopping $230 million in prior tax overpayments.

Imagine Doral’s surprise when the Puerto Rican government said, in no uncertain terms, “no.” Lacking any recourse, Doral filed a lawsuit in Puerto Rico’s home government, seeking to recover the money which they believed they were owed and so desperately needed.

Enter the Puerto Rican Supreme Court

Just four days later, the Supreme Court rendered their decision in Doral’s favor, and further forced the government to expedite a review of the repayment process, with a judgment set to be rendered by June 26.

While this far from guarantees that Doral will receive the desperately needed funds they seek to recover, the quick turnaround from the Supreme Court does give Doral a shot.

Although this development only means that Doral’s chances of receiving repayment from the government has changed from “no” to “maybe,” the company was ecstatic at the development. In a press release responding to the Supreme Court’s decision, Doral CEO Glen Wakeman said “We welcome the Puerto Rico Supreme Court's decisive action today. Doral is committed to pursuing its legal rights in this matter, and we invite the government of Puerto Rico to join us at the negotiating table so that we can resolve this issue and move forward."

What this Means for Doral and Their Stockholders

While it’s impossible to assign an exact dollar amount to hope, the market tried its best to do so on Monday trading action, with shares of Doral spiking on a prayer that the bank could receive a windfall.  

The Supreme Court’s decision clearly gives Doral some bargaining power, opening up the possibility that while they might not, and most likely will not, receive the full $230 million they seek, they can likely extract some capital from the government to shore up their reserves.

To be sure, Doral’s not out of hot water just yet. The San Juan-based lender still faces a class-action lawsuit from stockholders concerning alleged securities violations.

But if they are able to extract the money they believe they are owed from the Puerto Rican government, their fortunes, and in turn their stockholder’s fortunes, will undoubtedly change for the better.

By 1:30 EST shares of Doral had climbed 26.74 percent to hit $4.40 a share.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for DRL
Christian Kat
24 Oct 14 12:50:03
$DRL Puerto Rico needs a financial control board https://t.co/yVnbQbGdqB
Attiva Capital
24 Oct 14 12:45:02
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Eaglestar
24 Oct 14 11:38:05
RT @attivacapital: @marquezocasio Isn't Salomon Levis the one that started the whole mess at $DRL before new mgmt team took over? http://t.…
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24 Oct 14 11:34:08
RT @attivacapital: @marquezocasio Isn't Salomon Levis the one that started the whole mess at $DRL before new mgmt team took over? http://t.…
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24 Oct 14 11:21:51
@marquezocasio Isn't Salomon Levis the one that started the whole mess at $DRL before new mgmt team took over? http://t.co/swUxImsT0B
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$DRL has filed a $5 million lawsuit against a former chief financial officer alleging breach of contract http://t.co/T0dbuwIRJc $BPOP
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23 Oct 14 18:46:21
RT @jantenen: How can a REIT acquire bank branches? $DRL http://t.co/xJw82gRdVI
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RT @attivacapital: $DRL Doral prepping to sell U.S. mainland operations??? http://t.co/C97CO3KJ40
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RT @PhilCheeze: @puertoricoguru @attivacapital @agarciapadilla $DRL will collect what is owed. US congress will see to it! Shorts are toas…
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$Stocknewsalerts
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$DRL Doral Financial Corporation Daily Stock Price Summary From our Stock News Alerts App
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23 Oct 14 14:00:03
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How can a REIT acquire bank branches? $DRL http://t.co/xJw82gRdVI
Attiva Capital
23 Oct 14 12:06:02
$DRL Doral prepping to sell U.S. mainland operations??? http://t.co/C97CO3KJ40
PhilCheeze
23 Oct 14 10:47:20
RT @attivacapital: Today we added $DRL again Doral 🏦 growth in mainland US Should mitigate risks related #PuertoRico subsidiary @agarciapa…
Attiva Capital
23 Oct 14 10:35:38
Today we added $DRL again Doral 🏦 growth in mainland US Should mitigate risks related #PuertoRico subsidiary @agarciapadilla @BacoFomento
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23 Oct 14 10:03:56
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PhilCheeze
23 Oct 14 10:03:12
RT @PoorButRich: $DRL Be greedy when others are fearful... :-)
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23 Oct 14 09:55:11
$DRL Be greedy when others are fearful... :-)
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22 Oct 14 21:06:36
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22 Oct 14 21:06:01
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$Stocknewsalerts
22 Oct 14 14:02:13
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22 Oct 14 13:13:27
RT @laurenholmesNYC: $DRL how high it will go? check our thoughts here: http://t.co/IhJaUAjPfb
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22 Oct 14 12:59:10
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Lauren Holmes
22 Oct 14 09:58:28
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21 Oct 14 21:10:26
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21 Oct 14 14:00:18
$DRL Doral Financial Corporation Daily Stock Price Summary From our Stock News Alerts App
PhilCheeze
21 Oct 14 12:08:44
RT @attivacapital: S&P : "If Puerto Rico loses the case ...a $45 million per year payout over five years -- would remain relatively small .…
PhilCheeze
21 Oct 14 12:08:40
RT @attivacapital: S&P: Puerto Rico Rating Unchanged On Doral $DRL Court Ruling
Attiva Capital
21 Oct 14 11:23:17
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Attiva Capital
21 Oct 14 11:22:21
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20 Oct 14 22:13:59
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20 Oct 14 21:47:13
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20 Oct 14 14:00:03
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20 Oct 14 13:03:14
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20 Oct 14 12:00:03
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Instaya
20 Oct 14 11:49:44
UPDATE 1-Puerto Rico mulls $2.5 bln debt sale to boost liquidity-sources #Finance http://t.co/QGGAwMOZXw … $DRL $FBP $BNS $SAN
Instaya
20 Oct 14 11:47:21
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20 Oct 14 11:44:44
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  +Follow June 9, 2014 2:27PM
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