S&P cuts Doral Financial

Standard & Poor's said it lowered Doral Financial Corp.'s long-term counterparty credit rating to B- from B+. The agency also said it changed the CreditWatch status to developing from negative.

Doral announced an agreement for commitments of up to $600 million of new equity capital as part of a private placement. About $420 million of this is contingent on the company successfully completing a Federal Deposit Insurance Corp.-assisted acquisition, S&P said, and will be returned to investors if an acquisition is not completed.

Although the agency said it views favorably Doral's capital-strengthening efforts and its ability to attract investor interest, S&P said it does not believe the noncontingent $180 million equity raise is sufficient to offset the sharp asset-quality deterioration the company has experienced.

The expected commensurate rise in future credit losses is likely to pressure both operating earnings and capitalization levels, the agency said.

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