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News from the Caribbean as of
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Puerto Rico mortage lender posts loss, says it needs 'significant' capital
Saturday, December 30, 2006
by Elizabeth Hester
NEW YORK, USA (Bloomberg): Doral Financial Corp., Puerto Rico's biggest mortgage lender, has posted a $28.7 million loss for the third quarter and said it "will need significant outside financing" to pay debt due next year.
The bank may have to issue additional equity and high-yield securities, and might sell assets to pay off the $625 million of senior notes that mature in July, San Juan-based Doral said Friday in a statement.
"The company cannot provide assurances that it will be ultimately successful in executing these initiatives," it said in the statement.
Doral lost $62.5 million in the first nine months of 2006 after accounting mistakes, a slowdown in the mortgage market and compression in the bank's net interest margin -- the difference between what it pays to borrow money and what it makes from loans.
"They have a big debt refunding due in the middle of the year and this doesn't make refunding that look any more promising," said Joseph Gladue, an equity analyst at Cohen & Co. in Philadelphia. "There's a very strong possibility that existing shareholders will be sharply diluted."
Gladue, who has a "sell" rating on the stock, said the lender may give up future profits if it sells assets, such as mortgage-servicing rights.
Doral's loss was 34 cents a share in the three months ended Sept. 30, compared with net income of 30 cents a share, or $40.9 million, in the same period a year earlier.
The company was fined $25 million in September by the US Securities and Exchange Commission for overstating earnings between 2000 and 2004. Doral inflated pretax profit by 100 percent, or $921 million, during the five-year period, according to the SEC.
Former Chief Executive Officer Salomon Levis, who resigned in September, sold about 260,000 shares of the company during the past two months, including 35,000 shares donated to charity, according to a regulatory filing. Levis owned about 530,000 shares as of January 2005, according to data compiled by Bloomberg.
Doral spokeswoman Lucienne Gigante declined to comment beyond the company's statement.
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