Doral Financial's (DRL) dispute with the Puerto Rican government over a tax refund will be heard on an expedited basis by the territory's courts.
Puerto Rico's Supreme Court has agreed to an expedited process for the Court of First Instance to hear the $7.8 billion-asset Doral's lawsuit against the territory's government. The court ruled Friday that an evidentiary hearing must happen by Thursday and a judgment must be issued by June 26.
"We welcome the Puerto Rico Supreme Court's decisive action today," Glen Wakeman, Doral's chief executive, said in a press release Friday. "Doral is committed to pursuing its legal rights in this matter, and we invite the government of Puerto Rico to join us at the negotiating table so that we can resolve this issue and move forward."
The San Juan, Puerto Rico, company filed the lawsuit last week after the territory's Treasury Department rejected a request for a roughly $230 million tax refund. The company previously had to restate earnings for several years after adjusting its calculations of the fair value of its floating-rate interest-only strips. Doral claims it is owed a tax refund after lowering its earnings for those years.
The Puerto Rican Treasury Department claims the agreement is null for several reasons, including that it is barred by statute of limitations.
Doral is facing a capital shortage after the Federal Deposit Insurance Corp. ruled that it could no longer count the Puerto Rican tax receivables towards it Tier 1 capital. The Federal Reserve Board has also ruled that Doral must classify the tax receivable agreement as a loss and write off the asset on its balance sheet.