Doral Financial Corp. has sued the Puerto Rican government seeking more than $229 million.
Doral claims that it has made that much in tax overpayments and that Puerto Rico should refund the money.
In April the Federal Deposit Insurance Corp. told Doral that it could not count $289 million of receivables from the commonwealth government as Tier 1 capital. The corporation had included it in its $679 million of Tier 1 capital.
The ruling will force the bank to either increase capital within 120 days of the ruling or submit a contingency plan to the FDIC to sell, merge or liquidate, Joseph Pucella, vice president at Moody's Investors Service said.
Doral Financial Corp. is the parent company of Doral Bank, which operates in Puerto Rico and a few states in the United States.
On May 9 Moody's downgraded a bond and a note issued by the Puerto Rico Conservation Trust Fund to C to Caa3. C is Moody's lowest possible rating. Doral Financial Corp. is the securities' obligor.
Doral Financial Corp. has over $150 million in outstanding municipal debt, issued through Puerto Rico public conduit entities.
"The Treasury Department believes this lawsuit and the allegations contained within are without merit,” the department said in a written statement. “Doral's request for a tax refund is not valid and its alleged overpayment of taxes never took place. The Department of Justice of Puerto Rico will vigorously defend the commonwealth against this lawsuit."
