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Doral Financial Chapter 11 Petition Filed

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According to the U.S. Bankruptcy Court docket, Doral Financial (dba Doral Financial Puerto Rico) filed for Chapter 11 protection in the Southern District of New York, case number 15-10573. This former bank holding company is represented by Mark I. Bane of Ropes and Gray. The Company concurrently announced its intentions to “wind-down its businesses, liquidate its assets, and seek approval of a plan of liquidation.” Doral Financial also intends to continue to pursue causes of action on behalf of its creditors.

On February 27, 2015, the Office of the Commissioner of Financial Institutions of Puerto Rico (OCIF) appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of Doral Bank, a state non-member bank chartered by the OCIF. Prior to the appointment of the FDIC as receiver, Doral Financial owned 100% of the equity in Doral Bank, and Doral Bank was the Company’s primary asset.

According to documents filed with the Court, “In the early to mid 2000s, members of the former management team controlled and operated DFC and its then subsidiaries (collectively, the ‘Doral Group’)….The Doral Group engaged in numerous derivative transactions at this time that resulted in illusory, non-cash earnings. This led to accounting errors and ultimately, among other things, misstated earnings and overpayments of taxes by the Doral Group. The Doral Group began a process of changing its financial reporting and accounting and restating its earnings. The restatement resulted in, among other things, a $4.5 billion market capitalization collapse and subsequent class action suits and fines from the U.S. Securities and Exchange Commission. Ultimately, the restatement resulted in the unwinding of multiple true sale transactions, subsequently requiring that billions of dollars of residential and commercial assets and related liabilities be brought back onto the Doral Group’s balance sheet.”

The Company’s most recent 10-K indicates $8.5 billion in total assets; however, the Chapter 11 petition notes an asset range of $50 to $100 million. Read more bankrupt company news.