Puerto Rico News: Doral Financial Group Files for Bankruptcy Two Weeks After Doral Bank Closes

Two weeks after regulators closed Puerto Rico's Doral Bank, the financial institution's parent company, Doral Financial Corp., filed for Chapter 11 bankruptcy protection on Wednesday, Reuters reported.



The initial seizure of the bank was partially due to a refusal by the U.S. commonwealth's government to pay $230 million in tax refunds claimed by Doral Financial, according to the newswire. Its parent's bankruptcy, meanwhile, "is the latest reminder of the financial crisis on the island," Reuters judged.
The territory has about $73 billion in debt and is battling a weak economy, declining population and high unemployment, the Wall Street Journal detailed. Its governor, Alejandro García Padilla, has recently proposed a tax reform that proved so unpopular that islanders asked for his ouster on the White House petitions Web site.
 
Efforts to tackle Puerto Rico's financial woes are complicated by the commonwealth's legal status, the newspaper noted. Its government agencies are barred from using Chapter 9 -- the part of the bankruptcy code that concerns municipal restructurings -- to deal with their debt obligations, the Wall Street Journal detailed.
Local leaders, meanwhile, are pushing a bill in U.S. Congress that would allow Puerto Rico's public corporations to file for bankruptcy to cut their $20 billion in debts, the AP added.
With $5.9 billion in assets, Doral Bank's failure in February was the largest in the United States since 2010, The institution had struggled for years, and its history includes improper accounting, a recapitalization and two reverse stock splits, the Wall Street Journal recalled.
The bank, which at one point had 26 branches in Puerto Rico, Florida and New York, had unsuccessfully attempted to expand in the continental United States in recent years, the Miami Herald noted. It held deposits of $4.1 billion and assets of $5.9 billion, the newspaper added.
Now, "(Doral Financial) intends to wind-down its businesses, liquidate its assets, and seek approval of a plan of liquidation," the company said in a statement. "(Doral Financial) also intends to continue to pursue causes of action on behalf of its creditors,"


Parent of Puerto Rico's Doral Bank files for bankruptcy

Gov. Alejandro García Padilla speaks at the governor's mansion on Nov. 14, 2013, in San Juan, Puerto Rico. (Photo : Christopher Gregory/Getty Images)
By Andre F. Puglie

Puerto Rico News: Doral Financial Group Files for Bankruptcy Two Weeks After Doral Bank Closes

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