Doral Financial in San Juan, Puerto Rico, has sold more loans in a move that will deplete capital but bolster the company's liquidity.

The $7.8 billion-asset company disclosed in a regulatory filing Tuesday that it sold $42 million of residential and commercial loans, along with real estate owned properties, to Abbey Finance Holdings. The company said it expects to suffer a loss of $20 million to $25 million on the sale, subject to certain post-closing conditions.

Doral said that sales "will adversely affect" its compliance with regulatory capital ratios at a time with the company is already considered "undercapitalized” by regulators. Doral noted, however, that the transaction will improve its liquidity position and reduce expenses tied to managing nonperforming assets. Doral will continue to service the loans over an interim period.

Doral, which had previously sold certain loans to Abbey, is embroiled in a legal battle with Puerto Rico's Treasury Department over claims the company is owed $230 million in overpaid taxes. Doral has warned that it could sell assets to shore up its Tier 1 capital levels after the Federal Deposit Insurance Corp. said it could no longer count Puerto Rican tax receivables to that capital ratio.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.