Fitch Downgrades Doral Bank to 'D' on Receivership

Fitch Ratings has downgraded the long-term Issuer Default Rating (IDR) of Doral Bank to 'D' from 'C' following the FDIC's announcement that the bank is closed and under receivership. Doral Bank's Viability Rating of 'f' indicates Fitch's view that the bank failed leading to regulatory intervention.

Fitch has also downgraded the ratings of the bank's parent, Doral Financial Corp (DRL), to 'D'. While the regulatory shutdown impacts Doral Bank, Fitch believes that DRL will likely default or file for bankruptcy in the near term as the company's ability to meet financial obligations has deteriorated significantly following the seizure of its operating bank.

The ratings for the senior notes and preferred stock remain at 'C', which is Fitch's lowest debt level rating. Fitch has also assigned Recovery Ratings to the bank's senior notes and preferred stock outstanding. Based on the company's regulatory Y9LP filing as of Dec. 31, 2014, in Fitch's view, the recovery prospects for the senior notes and the preferred obligations, the latter of which are already in deferral, are very poor given the minimal level of assets and cash that the holding company possesses subsequent to the seizure of Doral Bank. Further, the FDIC estimates that it will incur a $749 million loss, further supporting the view that recovery for unsecured holding company creditors are expected to be minimal.

The FDIC, as receiver, entered into a purchase and assumption agreement with Banco Popular de Puerto Rico, Hato Rey, Puerto Rico and an alliance with co-bidders including FirstBank Puerto Rico, Centennial Bank, Conway Arkansas, and J.C. Flowers III LP to acquire the banking operations including all deposits of Doral Bank. As such, Fitch believes Doral Bank's long-term and short-term deposit ratings would be higher than its current ratings of 'C/C' reflecting the depositors are in a better position now. However, the deposits were transferred to three different entities. Fitch has withdrawn the deposit ratings at this time.

As of Dec. 31, 2014, Doral Bank had approximately $5.9bn in total assets. As part of the transaction with the FDIC, Banco Popular will purchase $3.25 billion of Doral Bank's assets. The FDIC entered into two separate agreements to sell $1.3 billion of Doral Bank's assets to other parties. Those sales are expected to close in 30 days. The FDIC will retain the remaining assets for later disposition.

Fitch expects to withdraw all ratings for DRL in approximately 30 days.

Fitch has downgraded the following ratings:

Doral Financial Corporation

--Long-term IDR to 'D' from 'C';

--Short-term IDR to 'D' from 'C';

--Viability Rating to 'f' from 'c'.

Doral Bank

--Long-term IDR to 'D' from 'C';

--Short-term IDR to 'D' from 'C';

--Viability Rating to 'f' from 'c'.

Fitch has affirmed the following ratings and assigned Recovery Ratings:

Doral Financial Corporation

--Senior debt at 'C/'RR6';

--Preferred stock at 'C/RR6'.

Fitch has affirmed the following ratings:

Doral Financial Corporation

--Support at '5';

--Support at Floor 'NF';

Doral Bank

--Support at '5';

--Support Floor at 'NF'.

Fitch has affirmed and withdrawn the following ratings:

Doral Bank

--Long-term deposits at 'CC' and withdrawn;

--Short-term deposit at 'C' and withdrawn.

Additional information is available at 'www.fitchratings.com'.

THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS OTHER THAN THROUGH THE MEDIUM OF ITS PUBLIC DISCLOSURE

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Recovery Rating for Financial Institutions' (Sept. 24, 2013);

--'Puerto Rico Banks: Difficult Operating Environment Constrains Ratings' (May 20, 2014).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Recovery Ratings for Financial Institutions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=717538

Puerto Rico Banks: Difficult Operating Environment Constrains Ratings

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=737227

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=980659

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