The Phoenix Companies, Inc. (“Phoenix”) announced that Phoenix Life Insurance Company and PHL Variable Insurance Company, wholly-owned direct and indirect subsidiaries of Phoenix (together, the “Companies”), reached an agreement as of April 30, 2015 with SPRR, LLC, Martin Fleisher, as trustee of the Michael Moss Irrevocable Life Insurance Trust II, and Jonathan Berck, as trustee of the John L. Loeb, Jr. Insurance Trust (collectively, the “Plaintiffs”), to resolve two previously disclosed class actions (the “Class Actions”) against the Companies relating to certain cost of insurance (“COI”) rate adjustments made in 2010 and 2011 with respect to certain policies issued by the Companies. The agreement requires that a formal settlement agreement (the “Settlement Agreement”) will be filed with the United States District Court for the Southern District of New York and will be subject to certain conditions and court approval.
The settlement class consists of all policyholders that were subject to the 2010 or 2011 COI rate adjustments (collectively, the “Settlement Class”) and will be structured to allow members of the Settlement Class to opt out of the settlement (the “Settlement”). The Companies will establish a Settlement fund, which may be reduced proportionally for any opt-outs, and will pay a class counsel fee if the Settlement is approved. The Companies will be released by all participating members of the Settlement Class. The Companies agreed to pay a total of $48.5 million, as reduced for any opt-outs, in connection with the Settlement.
You should probably listen to their conference call- outlook was very subdued even in light of record backlog. Q4 earnings were boosted by sale of land and tax gains- operating earnings were abysmal. Reminds me of the Tampa Bay Buccaneers when they were 0-13- someone asked the coach what he thought about the team's execution- the coach answered that he was in favor of it. GLDD execution was pathetic and they were not encouraging people to look for a great deal of margin improvement which is unfathomable.
I think a sober assessment would be that Doral has been warned again and again and again to "put their affairs in order" because they have terminal stage 10 brain cancer. If they have not found an interested buyer at this point I think they are toast. If they can't deal in brokered CD's do they think any financial institution is going to want to do business with you? Any bank at this point that would extend them any credit or do any other kind of transactions with them would be out of their mind. I just hope the holding company gets to keep the tax attributes that should be quite large- not quite as large as WaMu (WMI Holdings) but sizable nonetheless.
On February 24, 2015 Doral Bank (the “Bank”), the principal operating subsidiary of Doral Financial Corporation (the “Company”), received a Joint Report of Examination (the “ROE”) from the Federal Deposit Insurance Corporation (the “FDIC”) and the Puerto Rico Office of the Commissioner of Financial Institutions for the period ending September 30, 2014 as well as a Notification of Capital Category — Prompt Corrective Action (the “PCA Letter”) from the FDIC pursuant to which the FDIC has notified the Bank that as of the date of the PCA Letter and based upon the adjustments in the ROE it deems the Bank to be “critically undercapitalized” as of September 30, 2014. By virtue of being deemed to be “critically undercapitalized” the Bank is subject to operating restrictions all or many of which have been described in previous Form 8-Ks filed by the Company with the Securities and Exchange Commission (the “SEC”). Under these operating restrictions the Bank is prohibited from doing any of the following:
1. Entering into any material transaction other than in the usual course of business, including any investment, expansion, acquisition, sale of assets, or other similar action with respect to which the depository institution is required to provide notice to the appropriate federal banking agency;
2. Extending credit for any highly leveraged transaction;
3. Amending the institution’s charter or by-laws, except to the extent necessary to carry out any other requirement of any law, regulation, or order;
4. Making any material change in accounting methods;
5. Engaging in any covered transaction (as defined in section 23A(b) of the Federal Reserve Act, 12 U.S.C. Section 371c(b));
6. Paying excessive compensation or bonuses;
7. Paying interest on new or renewed liabilities at a rate that would increase the institution’s weighted average cost of funds to a level significantly exceeding the prevailing rates of interest on insured deposits in the institution’s normal market areas; and
8. Making any principal or interest payment on subordinated debt beginning 60 days after becoming critically undercapitalized.
The PCA Letter further directs the Bank to develop policies and procedures to ensure compliance with the restrictions set forth in section 38 of the Federal Deposit Insurance Act and section 324.405 of the FDIC Rules and Regulations, 12 C.F.R. Section 324.405(a)(4) that apply to “critically undercapitalized” institutions. The PCA Letter further instructs the Bank that it may not accept, renew, or roll over brokered deposits; it may not pay a rate of interest on any type of deposit that exceeds the national average for that type of deposit by more than 75 basis points unless it requested and received a high-rate determination from the appropriate FDIC regional office (and in the case of deposits accepted from outside the Bank’s normal market area, the Bank may not pay a rate of interest which exceeds the national rate cap for that type of deposit); the Bank continues to be deemed to be in “troubled condition” and subject to the restrictions applicable thereto; and the Bank continues to be subject to the Supervisory Prompt Corrective Action Directive issued on January 26, 2015 (the “PCA Directive”) and notwithstanding the Bank’s February 10, 2015 administrative appeal the Bank remains subject to the PCA Directive.
8k filing-Update on Future Operations
In order to comply with regulatory requirements to de-risk the Bank while maintaining minimum capital and sufficient liquidity (including planning for the maturity of brokered deposits, which the Company is prohibited from replacing with additional brokered deposits), the Bank has sold performing and non-performing assets (principally mortgage loans and real estate owned properties) and certain businesses. The reduction in total assets will reduce both the Company’s revenues and expenses (after giving effect to reductions in force to re-size the Bank to reflect its reduced operating size).
The Company is unable to determine the extent of any recovery for its debt holders and creditors as well the preferred or common holders under either the Updated Capital Plan (which has not been accepted by the FDIC) or a receivership of the Bank by the FDIC as the amount of any recovery will depend upon the priority of the claim, the price at which assets and businesses can be sold and the extent of liability certain parties such as the Commonwealth might have to the Company and the Bank for breaching its payment obligations under the 2012 Closing Agreement and whether the Company will be able to collect monies from the Commonwealth even if its right to recover against the Commonwealth is affirmed on appeal.
Time Is Running Out for Doral Financial
PCAs are often considered one of the last public warnings before a bank goes into receivership, which Doral acknowledged was a possibility in a recent regulatory filing, and industry experts warned that the company is quickly running out of options.
"I think the likelihood that Doral could raise sufficient capital is as close to zero as you can possibly get," said Bert Ely at consulting firm Ely & Co. "I don't think Doral will be able to continue as an independent organization."
the wholesale puking of DRL pfd this week has all the earmarks of a forced margin liquidation. One would have to be a very brazen insider trader to have disgorged this much stock in the face of no announced news. I am still betting on a Ch 11 filing with some attempt to forestall an FDIC takeover while the PR tax issue is decided. Could break new ground in terms of judicial brinksmanship- turf war between regulators and bankruptcy and other courts.
common trading at $2.75 per share while $25 liq preference pfds are trading at 50 cents a share in volume- even if Doral is seized these preferreds look like a much better speculation than the common. My bet is a ch 11 filing simultaneous with FDIC takeover by Friday which is when the FDIC likes to do its dirty work
The FHLB also notified the Bank that as a safe and sound practice and in order to comply with the FHLB’s regulatory guidelines, the FHLB could not extend credit to a capital-deficient member that has positive tangible capital if it receives written notice from the appropriate federal banking agency (in the case of the Bank, the Federal Deposit Insurance Corporation (the “FDIC”)) that the member’s use of the FHLB’s advances is prohibited. To the Company’s knowledge the FDIC has not provided any such notice to the FHLB. The FHLB periodically checks the Bank’s status with the FDIC with its next scheduled check to occur on or about February 22, 2015. After February 22, 2015, the Company understands that the FHLB anticipates that it will thereafter seek guidance from the FDIC for each overnight advance requested by the Bank before making such advance. The Bank is currently assessing the materiality and magnitude of the impact of these changes in its liquidity forecasts.
Prompt Corrective Action Directive
On January 26, 2015, the Board of Directors (the “Board”) of the Bank received a letter dated January 26, 2015 from the FDIC notifying the Board that on January 26, 2015 the FDIC, acting under its discretionary authority, had issued against the Bank a Prompt Corrective Action Directive (the “Directive”). The Directive became effective immediately upon its receipt by the Bank.
The Directive directs the Bank to promptly (i) increase the amount of its Tier 1 capital to a level sufficient to restore the Bank to the capital category of “adequately capitalized” under Section 38(b)(1)(B) of the Federal Deposit Insurance Act; and/or (ii) accept an offer to combine with another insured depositary institution.
Sentiment: Strong Sell
The new type of debt would build upon the $10 billion private-activity bond market by including funding for airports, ports, mass transit, water and sewer initiatives.
Obama Proposes New Muni Bonds for Public-Private Infrastructure
By Brian Chappatta - Jan 16, 2015
President Barack Obama is proposing a new class of municipal bonds to spur public-private partnerships in U.S. infrastructure projects.
The program, called Qualified Public Infrastructure Bonds, wouldn’t expire, and there’d be no cap on issuance, the administration said in a statement Friday. The debt also wouldn’t be subject to the Alternative Minimum Tax, which limits the tax benefits and exemptions that high-earning individuals can claim to reduce their levies.
“QPIBs will extend the benefits of municipal bonds to public private partnerships, like partnerships that involve long-term leasing and management contracts, lowering the cost of borrowing and attracting new capital,” the administration said in the statement. The bonds will serve “as a permanent lower cost financing tool to increase private participation in building our nation’s public infrastructure.”
The proposal for a new type of security in the $3.6 trillion municipal market is part of a broader White House plan calling for more investment in roads, bridges and other infrastructure in advance of the administration’s budget proposal that will be released Feb. 2.
The market contracted in 2014 for an unprecedented fourth straight year as local officials refrained from borrowing even as tax-exempt interest rates were close to generational lows. The last time the market expanded was in 2010, the final year of the federal Build America Bonds program. That program provided municipalities a subsidy on interest costs for issuing taxable debt to finance infrastructure work.
The new type of debt would build upon the $10 billion private-activity bond market by including funding for airports, ports, mass transit, water and sewer initiatives. The bonds couldn’t be used to privatize public systems or finance privately owned facilities.
America’s federal, state and local governments need to spend $3.6 trillion through 2020 to put the nation’s critical systems in adequate shape, according to a 2013 report from the American Society of Civil Engineers. Without higher spending, the group projects the costs of travel delays, power and water outages will reach $1.8 trillion by 2020.
Sentiment: Strong Buy