Beleaguered financial services company Doral Financial is in “active negotiations” with a private equity firm in order to keep the company afloat. Doral did not disclose names, but the company said its financial assistance would come from “a number of private equity and other sophisticated investors”.
Doral needs approximately $700 million (€514 million) to $800 million in external funding to continue operations, the San Juan-headquartered firm disclosed in a Securities and Exchange Commission filing.
The firm, whose four mortgage subsidiaries have dominated the Puerto Rican home loan industry, is in need of liquidity in order to pay $625 million-worth of floating senior rate notes that mature 20 July. It’s also in need of cash for various settlements from shareholder litigation and a class action suit related to restatement of the firm’s 2005 financial data.
If Doral secures a deal with its private equity suitor(s), it said the transaction “would be accomplished predominantly through the issuance of new equity securities at a discount to market price and would result in very significant dilution to the company’s existing shareholders”.
Former Doral chairman and chief executive, John Ward, resigned in January – reportedly over objections to such a recapitalization plan.
Should it fail to secure the desired transaction, Doral may not be able to continue operations, it said.
Doral has a market capitalization of approximately $185 million. Last month, it announced a deal to sell its 11 New York branches to New York Commercial Bank in order to focus on the Puerto Rican market.