Newsflash: FDIC Resolves Doral Bank in a New Receivership Action
The $5.9 billion Doral Bank (San Juan, Puerto Rico), a wholly owned subsidiary of Doral Financial Corporation (Coral Gables, Florida), was closed by the Office of the Commissioner of Financial Institutions of Puerto Rico, on February 27, 2015. The Federal Deposit Insurance Corporation (FDIC) was appointed receiver. The public company parent, Doral Financial Corporation, is not directly impacted by the FDIC’s action.
All bondholders and other creditors having claims against Doral Bank (not Doral Financial Corporation) must submit proof of claims in writing to the FDIC Receiver within the allotted time period designated by the FDIC. The FDIC’s release did not identify that date, which is generally 90 days from the closing of the bank.
The Purchase and Assumption Transaction:
Banco Popular de Puerto Rico agreed to pay the FDIC a premium of 1.59 percent for the right to assume $3.25 billion of Doral Bank's deposits and undertake its banking operations. It will operate eleven of Doral Bank's 26 former branches. Three other banks have contracted with Banco Popular to operate the other 15 branches.
The FDIC entered into two separate agreements to sell $1.3 billion of Doral Bank's assets to other parties, which are expected to close within 30 days. The balance of the bank’s assets will be sold at a later date.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $748.9 million. That estimate is based on the discounted payment it made to Banco Popular to facilitate the assumption of Doral’s deposits, plus losses attributable to current and future sales of Doral's assets by the FDIC. The FDIC’s actual loss must be satisfied before general unsecured creditors will realize any value from their claims in the receivership.