Doral Financial Corp. told the Securities and Exchange Commission Monday that the revised capital restoration plan submitted to the Federal Deposit Insurance Corp. last week was rejected for failing to “meet the criteria.”
The plan was submitted Dec. 10, and less than a month later, the regulator said Doral fell short of showing it could return to an “adequately capitalized” capital category without relying on a $229 million payment it has claimed from the government related to a tax overpayment reimbursement.
That payment is currently under dispute in the courts.
“The cornerstone of Doral’s capital restoration plan is the obligation of the Puerto Rico government to provide the Bank $229M as it is owed under the Closing Agreement dated March 26, 2012 by and between the company and the Secretary of the Puerto Rico Department of the Treasury,” Doral said in a statement.
“The Puerto Rico Court of First Instance has affirmed that the agreement is lawful and valid. The Bank intends to continue to discuss with the FDIC its capital restoration plan, which it believes is the best possible outcome for all constituencies,” the bank further noted.
“To date, the Puerto Rico government has refused to acknowledge or adhere to the court’s ruling, and refuses to negotiate a resolution. Doral has asked the Puerto Rico Supreme Court to order that the case’s appeals are heard in an expedited manner in order to secure a mutually beneficial resolution that is fair and respects over 1,000 employees of Doral, a bank that has been instrumental in supporting economic opportunity and access to affordable housing in Puerto Rico for over 40 years,” Doral said.
The bank remains subject to the requirement to submit an acceptable capital restoration plan as well as the other operating restrictions contained in a “Consent Order” and the two prompt corrective action letters from the FDIC, dated June 12, 2014 and Sept. 26, 2014, in which the regulator deemed Doral as being in “troubled condition.”
In a third letter dated Dec. 8, the FDIC instructed Doral to submit a revised capital restoration plan that addresses the deficiencies in its capital restoration plan, including steps to be taken in case the government refund fails to come through.
However, Doral said it “believes the inclusion of the payment obligations from Puerto Rico is appropriate as [it] has a court order validating the obligation of Puerto Rico.”
The Bank intends to continue to discuss with the FDIC its capital restoration plan, which it “believes is the best possible outcome for all constituencies.”