Although I am short, I do agree that Doral is likely to prevail if its doors stay open long enough and that those headlines would cause the stock to pop up. Problem for Doral and its Shareholders is that Doral's recpap plan is due to FDIC today or Monday. Even a ruling in Doral's favor (which is not likely for at least a week and it could easily take several weeks) is not going to be enough to satisfy the FDIC because 1) PR is a junk rated debtor and it will have five years to pay the refund (20% each year) per the terms of the tax refund agreement and 2) Doral's fire sales since the FDIC letter have generated losses/wiped out existing capital by an amount well in excess of the tax refund due. Doral needs a white knight with $500+ Million in new money. The only hope for existing shareholders is that the recap plan will through them a couple of bucks per share since that would be chump change to the white knight taking over the Bank.
They have until early September to meet capital requirements. The July date is just a date to present a plan, which may or may not be required to be implemented. Similar to early July when they had to submit a contingency plan for sale/merger/liquidation. They are plans to satisfy their regulators that they have a plan in place (if required), but they still have until September to come up with the required shortfall.
Shorting at this level is just risky. The time to short is to wait for Doral to likely win in the lower court, when the stock goes up to $10 - 15. Short at the top of that spike, and watch it crumble down when PR inevitably appeals the decision.
Hello Late, I think your missing some important issues. Puerto Rico is call the Greece of the U.S, Greece goes with the Euro, and for them to stay in the Euro Greek Bond Holders had to take a 90 percent haircut not once but twice. The Puerto Rico Bonds are worth 40 cents on the dollar last week. If they had 24 billion they could buy all the bonds back but they don't. The chances of Puerto Rico doing a restructure of there bonds are extremely high. They can do what Greece did, we will give you 20 cents on the dollar, which would bring there debt to 12 billion and drop the interest rates on those bonds tremendously and Puerto Rico is back in business. Regarding the fire side sell on the mortgages, if I hold a 10 million dollar mortgage and a company has paid in for 10 years he brought down the principle to 7.5 million, I am still selling a 10 million dollar loan, and if a buyer says I will give you 6.5 million my loss is 1 million or 14 percent on that 10 million dollar loan, principle payments are excluded from real value of a loan.
The urgency with which the PR government keeps trying to delay or avoid this going to trial shows how weak their case must be. If they had a strong case they'd want this to go to court immediately to get it over with, as it hangs like a dark cloud over investor sentiment while it remains unresolved.