On the heels of an announcement that Doral Financial had gotten final court approval of a $129 million shareholder class-action settlement, the Puerto Rico-based bank-holding company reported that its shareholders had approved a buyout of the company by a group of private-equity investors and hedge funds.
Investors in the deal include Bear Stearns Merchant Banking and funds managed by Marathon Asset Management, Perry Capital, and the D. E. Shaw group.
Subject to fulfilling some closing conditions the $610 million buyout, the buyout is currently expected to close on July 19. The proceeds of the deal would enable the company to pay off $625 million in floating-rate senior notes issued in 2004, which come due on July 20.
The court settlement satisfied another condition of the buyout. On Tuesday, Doral Financial, a big mortgage lender, announced that it had obtained a court agreement in a consolidated securities class-action lawsuit and shareholder derivative litigation filed against it. The litigation stemmed from its April 2005 announcement of Doral’s need to restate its previously issued financials.
In the April 2005 announcement, Doral reported that it would restate financials from Jan. 1, 2000 to Dec. 31, 2004, to correct its methods for gauging the fair value of its floating-rate “interest-only strips,” according to the news service. The initial lawsuits were filed after that announcement, in which the company also said that it would write off $600 million.
The consolidated lawsuit alleged that the company engaged in accounting fraud and issued materially false and misleading financials that overstated its pretax income and understated its debt, according to the Associated Press.
Also in 2005, Doral fired its CFO, Ricardo Melendez. It also announced that its CEO, Salomon Levis, would step down later that year and that treasurer Mario Levis would resign immediately.
Under the court settlement, Doral and its insurers will pay a total of $129 million to the plaintiffs and improve its corporate governance. The company’s insurers are expected to kick in about $34 million, and individual defendants are expected to pay a combined $1 million, AP reported.