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As filed with the Securities and Exchange Commission on April 14, 1999
Registration No. 333-________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
DORAL FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
----------------------
COMMONWEALTH OF PUERTO RICO 66-0312162
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1159 FRANKLIN D. ROOSEVELT AVENUE
SAN JUAN, PUERTO RICO 00920
(787) 749-7100
(Address, including zip code, and telephone number,
including area code, of registrant's principal and executive offices)
----------------------
SALOMON LEVIS, CHIEF EXECUTIVE OFFICER
DORAL FINANCIAL CORPORATION
1159 FRANKLIN D. ROOSEVELT AVENUE
SAN JUAN, PUERTO RICO 00920
(787) 749-7100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
COPIES TO:
IGNACIO ALVAREZ DANIEL M. ROSSNER
EDUARDO J. ARIAS BROWN & WOOD LLP
PIETRANTONI MENDEZ & ALVAREZ LLP ONE WORLD TRADE CENTER
SUITE 1901, BANCO POPULAR CENTER NEW YORK, NEW YORK 10048-0057
209 MUNOZ RIVERA AVENUE (212) 839-5300
SAN JUAN, PUERTO RICO 00918
(787) 274-1212
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: From
time to time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_________________
If delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, please check the following box. [X]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum
Aggregate Offering Amount of
Title of Each Class of Securities to be Registered Price (1) Registration Fee (2)
- ---------------------------------------------------------------------------------------------------------------------------
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Debt Securities; Preferred Stock (3)..................................... $250,000,000 $69,500
===========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of computing the registration fee. The
proposed maximum offering price per unit will be determined from time to
time by the Registrant in connection with the issuance by the Registrant of
the securities registered hereunder.
(2) The registration fee has been calculated in accordance with Rule 457(o)
under the Securities Act of 1933, as amended, and reflects the offering
price rather than the principal amount of any Debt Securities issued at a
discount.
(3) In addition to any Debt Securities or Preferred Stock that may be issued
directly under this registration statement, there are being registered
hereunder an indeterminate amount of Debt Securities, and an indeterminate
number of shares of Preferred Stock as may be issued upon conversion or
exchange of Preferred Stock or Debt Securities. No separate consideration
will be received for any Debt Securities or Preferred Stock so issued upon
such conversion or exchange.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 14, 1999
PROSPECTUS
DORAL FINANCIAL CORPORATION
[LOGO]
MAY OFFER --
$250,000,000
Debt Securities
Preferred Stock
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Doral Financial will provide the specific terms of these securities in
supplements to this prospectus. You should read this prospectus and
the accompanying prospectus supplement carefully before you invest.
INVESTING IN THESE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE OR
COMMONWEALTH OF PUERTO RICO SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS
OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT DEPOSITS OR SAVINGS ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
This prospectus is dated April ___, 1999
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TABLE OF CONTENTS
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PAGE
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SUMMARY ................................................................................................. 3
RISK FACTORS.............................................................................................. 6
Fluctuations in Interest Rates May Hurt
Doral Financial's Business.............................................................. 6
Doral Financial May Suffer Losses
From Mortgage Loans It Sells
But Retains the Credit Risk............................................................. 7
Increases in Doral Financial's Originations
of Commercial Loans Has
Increased Its Credit Risks.............................................................. 7
Doral Financial Is Exposed To Greater
Risk Because Its Business
Is Concentrated In Puerto Rico.......................................................... 7
Doral Financial's Business Would Be
Disrupted If Its Computer
Systems Cannot Work Properly
With Year 2000 Data..................................................................... 7
DORAL FINANCIAL........................................................................................... 7
USE OF PROCEEDS........................................................................................... 9
DESCRIPTION OF DEBT SECURITIES............................................................................ 9
General.......................................................................................... 9
Denominations.................................................................................... 10
Subordination.................................................................................... 10
Limitations on Liens............................................................................. 11
Consolidation, Merger or Sale.................................................................... 12
Modification of Indentures....................................................................... 12
Events of Default................................................................................ 12
Covenants........................................................................................ 13
Payment and Transfer............................................................................. 13
Global Securities................................................................................ 14
Defeasance....................................................................................... 14
DESCRIPTION OF PREFERRED STOCK............................................................................ 14
General.......................................................................................... 14
Rank............................................................................................. 15
Dividends........................................................................................ 15
Conversion or Exchange........................................................................... 16
Redemption....................................................................................... 16
Liquidation Preference........................................................................... 17
Voting rights.................................................................................... 17
DESCRIPTION OF CAPITAL STOCK.............................................................................. 18
Authorized Capital............................................................................... 18
Outstanding Serial Preferred Stock............................................................... 18
8% Preferred Stock............................................................................... 18
7% Preferred Stock............................................................................... 19
PLAN OF DISTRIBUTION...................................................................................... 20
By Agents........................................................................................ 20
By Underwriters.................................................................................. 20
Direct Sales..................................................................................... 21
General Information.............................................................................. 21
WHERE YOU CAN FIND MORE
INFORMATION...................................................................................... 21
LEGAL OPINIONS............................................................................................ 22
EXPERTS ................................................................................................. 22
</TABLE>
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SUMMARY
This summary provides a brief overview of the key aspects of Doral
Financial and the most significant terms of the offered securities. For a more
complete understanding of the terms of the offered securities, before making
your investment decision, you should carefully read:
- this prospectus, which explains the general terms of the securities
that Doral Financial may offer;
- the accompanying prospectus supplement, which (1) explains the
specific terms of the securities being offered and (2) updates and
changes information in this prospectus; and
- the documents referred to in "Where You Can Find More Information" on
page 21 for information on Doral Financial, including its financial
statements.
DORAL FINANCIAL
Doral Financial is a bank holding company engaged in the mortgage banking,
banking and securities businesses.
Doral Financial's principal executive offices are located at 1159 Franklin
D. Roosevelt Avenue, San Juan, Puerto Rico, and its telephone number is (787)
749-7100.
THE SECURITIES DORAL
FINANCIAL MAY OFFER
Doral Financial may use this prospectus to offer up to $250,000,000 of:
- debt securities; and
- preferred stock.
A prospectus supplement will describe the specific types, amounts, prices, and
detailed terms of any of these offered securities.
DEBT SECURITIES
The debt securities are unsecured general obligations of Doral Financial
in the form of senior or subordinated debt. The senior debt will have the same
rank as all of Doral Financial's other unsecured and unsubordinated debt. The
subordinated debt will be subordinated to all Senior Indebtedness, as defined
below under "Description of Debt Securities - Subordination."
The senior and subordinated debt will be issued under separate indentures
between Doral Financial and a trustee. The trustees under the indentures will
be banks or trust companies. Below are summaries of the general features of the
debt securities from these indentures. For a more detailed description of these
features, see "Description of Debt Securities" below. You are also encouraged
to read the indentures, which are filed as exhibits to the registration
statement of which this prospectus is a part. You can receive copies of these
documents by following the directions on page 21.
GENERAL INDENTURE PROVISIONS
THAT APPLY TO SENIOR AND
SUBORDINATED DEBT SECURITIES
- The indentures do not limit the amount of debt that Doral Financial
may issue or provide holders any protection should there be a highly
leveraged transaction, recapitalization or restructuring involving
Doral Financial. However, the senior debt indenture does limit Doral
Financial's ability to pledge the stock of any subsidiary that meets
the financial thresholds in the indenture. These thresholds are
described below under "Description of Debt Securities."
- Each indenture allows for different types of debt securities,
including indexed securities, to be issued in series.
- The indentures allow Doral Financial to merge or to consolidate with
another company, or sell all or substantially all of its assets to
another company. If any of
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these events occur, the other company would be required to assume
Doral Financial's responsibilities for the debt securities. Unless
the transaction results in an event of default, Doral Financial will
be released from all liabilities and obligations under the debt
securities when the successor company assumes Doral Financial's
responsibilities.
- The indentures provide that holders of a majority of the principal
amount of the senior debt securities and holders of a majority of the
total principal amount of the subordinated debt securities
outstanding in any series may vote to change Doral Financial's
obligations or your rights concerning those securities. However, some
changes to the financial terms of a security, including changes in
the payment of principal or interest on that security or the currency
of payment, cannot be made unless every holder of that security
consents to the change.
- Doral Financial may satisfy its obligations under the senior debt
securities or be released from its obligation to comply with the
limitations discussed above at any time by depositing sufficient
amounts of cash or U.S. government securities with the trustee to pay
Doral Financial's obligations under the particular senior debt
securities when due.
- The indentures govern the actions of the trustee with regard to the
debt securities, including when the trustee is required to give
notices to holders of the securities and when lost or stolen debt
securities may be replaced.
EVENTS OF DEFAULT THAT
APPLY TO SENIOR DEBT
The events of default specified in the senior debt indenture include:
- failure to pay required interest for 30 days;
- failure to pay principal when due;
- failure to make a required sinking fund payment when due;
- failure to perform other covenants for 90 days after notice;
- acceleration of the senior debt securities of any other series or any
indebtedness for borrowed money of Doral Financial and certain
subsidiaries, in each case exceeding $5,000,000 in an aggregate
principal amount; and
- certain events of insolvency, bankruptcy or reorganization involving
Doral Financial, whether voluntary or not.
EVENTS OF DEFAULT THAT
APPLY TO SUBORDINATED DEBT
The only events of default specified in the subordinated debt indenture
are certain events of insolvency, bankruptcy or reorganization involving Doral
Financial.
REMEDIES
If there were an event of default, the trustee or holders of 25% of the
principal amount of debt securities outstanding in a series could demand that
the principal be paid immediately. However, holders of a majority in principal
amount of the securities in that series could rescind that acceleration of the
debt securities.
The subordinated debt indenture does not provide for any right of
acceleration of the payment of principal of a series of subordinated debt
securities upon a default in the payment of principal or interest or in the
performance of any covenant or agreement in the subordinated debt securities or
in the subordinated debt indenture. However, in the event of a default in the
payment of principal or interest, the holder of any debt security shall have
the right to institute a suit for the collection of such overdue payment.
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PREFERRED STOCK
Doral Financial may issue preferred stock with various terms to be
established by its board of directors or a committee designated by the board.
Each series of preferred stock will be more fully described in the particular
prospectus supplement that will accompany this prospectus, including redemption
provisions, rights in the event of liquidation, dissolution or winding up of
Doral Financial, voting rights and conversion rights.
Generally, each series of preferred stock will rank on an equal basis with
each other series of preferred stock and will rank prior to Doral Financial's
common stock. The prospectus supplement will also describe how and when
dividends will be paid on the series of preferred stock.
RATIO OF EARNINGS TO FIXED
CHARGES AND RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table shows (1) the ratio of earnings to fixed charges and
(2) the ratio of earnings to combined fixed charges and preferred stock
dividends of Doral Financial for each of the five most recent fiscal years. The
ratio of earnings to fixed charges is a measure of Doral Financial's ability to
generate earnings to pay the fixed expenses of its debt. The ratio of earnings
to combined fixed charges and preferred stock dividends is a measure of Doral
Financial's ability to generate earnings to pay the fixed expenses of its debt
and dividends on its preferred stock.
These computations include Doral Financial and its subsidiaries. For
purposes of computing these ratios, earnings consist of pre-tax income from
continuing operations plus fixed charges and amortization of capitalized
interest, less interest capitalized. Fixed charges consist of interest expensed
and capitalized, amortization of debt issuance costs, and Doral Financial's
estimate of the interest component of rental expense. Ratios are presented both
including and excluding interest on deposits. The term "preferred stock
dividends" is the amount of pre-tax earnings that is required to pay dividends
on Doral Financial's outstanding preferred stock.
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TWELVE MONTHS ENDED DEC. 31,
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1998 1997 1996 1995 1994
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Ratio of Earnings to Combined Fixed Charges
Including Interest on Deposits.............. 1.51 1.61 1.66 1.50 1.78
Excluding Interest on Deposits.............. 1.61 1.72 1.75 1.54 1.82
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
Including Interest on Deposits.............. 1.50 1.61 1.67 1.49 1.76
Excluding Interest on Deposits.............. 1.59 1.72 1.76 1.53 1.79
</TABLE>
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RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus, including the information incorporated by reference in this
prospectus, before deciding to invest in any of the offered securities.
FLUCTUATIONS IN INTEREST RATES MAY HURT DORAL FINANCIAL'S BUSINESS
Interest rate fluctuations is the primary market risk affecting Doral
Financial. Changes in interest rates affect the following areas of its
business:
- the number of mortgage loans originated and purchased;
- the interest income earned on loans and securities;
- gain on sale of loans;
- the value of securities holdings; and
- the value of its servicing asset.
Increases in Interest Rates Reduce Demand for Mortgage Loans. Higher
interest rates increase the cost of mortgage loans to consumers and reduce
demand for mortgage loans, which hurts Doral Financial's profits. Reduced
demand for mortgage loans results in reduced loan originations by Doral
Financial and lower mortgage origination income. Demand for refinance loans is
particularly sensitive to increases in interest rates. Doral Financial has for
many years relied on refinance loans for a large portion of its mortgage loan
production.
Increases in Interest Rates Reduce Net Interest Income. Increases in
short-term interest rates reduce net interest income, which is an important
part of Doral Financial's earnings. Net interest income is the difference
between the interest received by Doral Financial on its assets and the interest
paid on its borrowings. Most of Doral Financial's assets, like its mortgage
loans and mortgage-backed securities are long-term assets with fixed interest
rates. In contrast, most of Doral Financial's borrowings are short-term. When
interest rates rise, Doral Financial must pay more in interest while interest
earned on its assets does not rise as quickly. This causes profits to decrease.
Increases in Interest Rates May Reduce or Eliminate Gain on Sale of
Mortgage Loans. If long-term interest rates increase between the time Doral
Financial commits to or establishes an interest rate on a mortgage loan and the
time it sells the loan, Doral Financial may realize a reduced gain or a loss on
such sale.
Increases in Interest Rates May Reduce the Value of Mortgage Loans and
Securities' Holdings. Increases in interest rates may reduce the value of Doral
Financial's financial assets and have an adverse impact on its earnings and
financial condition. Doral Financial owns a substantial portfolio of mortgage
loans, mortgage-backed securities and other debt securities with fixed interest
rates. The market value of an obligation with a fixed interest rate generally
decreases when prevailing interest rates rise.
Decreases in Interest Rates May Adversely Affect Value of Servicing Asset.
Decreases in interest rates lead to increases in the prepayment of mortgages by
borrowers, which may reduce the value of Doral Financial's servicing asset. The
servicing asset is the estimated present value of the fees Doral Financial
expects to receive on the mortgages it services over their expected term. Doral
Financial assigns this value based on what other
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persons have paid for similar servicing rights in recent transactions. If
prepayments increase above expected levels, the value of the servicing asset
decreases because the amount of future fees expected to be received by Doral
Financial decreases. Doral Financial may be required to recognize this decrease
in value by taking a charge against its earnings, which causes its profits to
decrease.
DORAL FINANCIAL MAY SUFFER LOSSES FROM MORTGAGE LOANS IT SELLS BUT RETAINS THE
CREDIT RISK
Doral Financial often retains all or part of the credit risk on sales of
mortgage loans that do not qualify for the sale or exchange programs of GNMA,
FNMA or FHLMC and may suffer losses on these loans. Doral Financial suffers
losses on these arrangements when foreclosure sale proceeds of the property
underlying a defaulted mortgage loan are less than the outstanding principal
balance of these loans and the costs of holding and disposing of the related
property.
INCREASES IN DORAL FINANCIAL'S ORIGINATIONS OF COMMERCIAL LOANS HAS INCREASED
ITS CREDIT RISKS
Doral Financial's recent increase in originations of mortgage loans
secured by income producing residential buildings and commercial properties has
increased its credit risks. These loans involve greater credit risks than
residential mortgage loans because they are larger in size and more risk is
concentrated in a single borrower. The properties securing these loans are also
harder to dispose of in foreclosure.
DORAL FINANCIAL IS EXPOSED TO GREATER RISK BECAUSE ITS BUSINESS IS CONCENTRATED
IN PUERTO RICO
Because most of Doral Financial's mortgage loans are secured by properties
located in Puerto Rico, Doral Financial is exposed to a greater risk of
delinquency or default on these mortgage loans resulting from adverse economic,
political or business developments and natural hazard risks, such as
hurricanes, that affect Puerto Rico. If Puerto Rico's real estate market
experiences an overall decline in property values, the rates of foreclosure
loss on the mortgage loans would probably increase substantially. This would
cause Doral Financial's profitability to decrease.
DORAL FINANCIAL'S BUSINESS WOULD BE DISRUPTED IF ITS COMPUTER SYSTEMS CANNOT
WORK PROPERLY WITH YEAR 2000 DATA
Doral Financial could experience a significant disruption to its business
operations that could have an adverse effect on its profitability if its
computer systems and the computer systems provided by third party vendors on
which it relies are not able to properly use date calculations in the year
2000. Doral Financial is taking steps that it believes are adequate to make
sure this does not happen. However, Doral Financial cannot assure you that
these efforts will be completely successful. Problems suffered by providers of
basic services such as telephone, water, sewer and electricity could also have
an adverse impact on Doral Financial's daily operations. Doral Financial is in
the process of revising its existing business interruption contingency plans to
address any disruptions of these basic services.
DORAL FINANCIAL
Doral Financial Corporation is a bank holding company organized under
the laws of the Commonwealth of Puerto Rico. Its main lines of business are
described below.
- Mortgage banking - Doral Financial is the leading mortgage banking
institution in Puerto Rico based on the volume of origination of
first mortgage loans secured by single family residences and the size
of its mortgage servicing portfolio. Doral Financial conducts this
business in Puerto Rico primarily
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through a division of Doral Financial, HF Mortgage Bankers, and its
subsidiaries, Doral Mortgage Corporation and Centro Hipotecario, Inc.
Doral Financial also conducts mortgage banking activities in the
mainland United States through Doral Mortgage and its indirect
subsidiary, Doral Money, Inc.
- Banking services - Doral Financial conducts this business in Puerto
Rico through its subsidiary, Doral Bank. Doral Financial is in the
process of opening a new federal savings bank subsidiary in the New
York City metropolitan area which it expects will commence operations
during the third quarter of 1999.
- Securities services - Doral Financial conducts this business in
Puerto Rico through its broker-dealer subsidiary, Doral Securities,
Inc.
Because Doral Financial is a holding company, the claims of creditors and
any preferred stockholders of Doral Financial's subsidiaries will have a
priority over Doral Financial's equity rights and the rights of Doral
Financial's creditors, including the holders of debt securities, and preferred
stockholders to participate in the assets of the subsidiary upon the
subsidiary's liquidation.
Doral Financial's subsidiaries that operate in the banking and securities
business can only pay dividends if they are in compliance with the applicable
regulatory requirements of federal and state bank regulatory authorities and
securities regulators. Doral Financial must also maintain the required capital
levels of a bank holding company before it may pay dividends on its stock.
There are various statutory and regulatory limitations on the extent to
which Doral Bank or any other banking subsidiary (including a federal savings
association) can finance or otherwise transfer funds to Doral Financial or its
nonbanking subsidiaries, either in the form of loans, extensions of credit,
investments or asset purchases.
- Such transfers by Doral Bank or any other banking subsidiary to Doral
Financial or any nonbanking subsidiary are limited to 10% of the
banking subsidiary's capital and surplus, and with respect to Doral
Financial and all such nonbanking subsidiaries, to an aggregate of
20% of the banking subsidiary's capital and surplus.
- Furthermore, loans and extensions of credit are required to be
secured in specified amounts and are required to be on terms and
conditions consistent with safe and sound banking practices.
In addition, there are regulatory limitations on the payment of dividends
directly or indirectly to Doral Financial. Federal and Puerto Rico authorities
also have the right to further limit Doral Bank's payment of dividends.
Under the policy of the Board of Governors of the Federal Reserve System,
a bank holding company is required to act as a source of strength to its
subsidiary banks and to commit resources to support such banks. As a result of
that policy, Doral Financial may be required to commit resources to Doral Bank
or any other banking subsidiary created in the future in circumstances in which
it might not do so absent such policy. Further, federal bankruptcy law provides
that in the event of the bankruptcy of Doral Financial, any commitment by Doral
Financial to regulators to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to priority of payment.
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USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, Doral
Financial will use the net proceeds from the sale of the offered securities for
general corporate purposes, including (1) funding its mortgage banking
activities, (2) making capital contributions or extensions of credit to its
existing and future banking and non-banking subsidiaries, (3) funding possible
acquisitions of mortgage banking and other financial institutions, and (4)
repayment of outstanding borrowings. Doral Financial does not at present have
any plans to use the proceeds from any offering for an acquisition.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be direct unsecured general obligations of Doral
Financial and will be either senior or subordinated debt. The debt securities
will be issued under separate indentures between Doral Financial and trustees
to be selected by it. Senior debt securities will be issued under a senior debt
indenture and subordinated debt securities will be issued under a subordinated
debt indenture. The senior debt indenture and the subordinated debt indenture
are sometimes referred to in this prospectus individually as an "indenture" and
collectively as the "indentures." The forms of the indentures have been filed
with the SEC as exhibits to the registration statement of which this prospectus
forms a part.
The following briefly summarizes the material provisions of the indentures
and the debt securities, other than pricing and related terms disclosed in the
accompanying prospectus supplement. The summary is not complete. You should
read the more detailed provisions of the applicable indenture for provisions
that may be important to you. So that you can easily locate these provisions,
the numbers in parenthesis below refer to sections in the applicable indenture
or, if no indenture is specified, to sections in each of the indentures.
Whenever particular sections or defined terms of the applicable indenture are
referred to, such sections or defined terms are incorporated into this
prospectus by reference, and the statement in this prospectus is qualified by
that reference.
GENERAL
The senior debt securities will be unsecured and rank equally with all of
Doral Financial's other senior and unsubordinated debt. The subordinated debt
securities will be unsecured and will be subordinated to all of Doral
Financial's Senior Indebtedness (as defined below under "- Subordination"). As
of March 31, 1999, Doral Financial had approximately $2.6 billion of Senior
Indebtedness owing to third parties.
A prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
- The title of the debt securities and whether the debt securities will
be senior or subordinated debt;
- The total principal amount of the debt securities;
- The percentage of the principal amount at which the debt securities
will be issued and any payments due if the maturity of the debt
securities is accelerated;
- The dates on which the principal of the debt securities will be
payable;
- The interest rate which the debt securities will bear, or the method
for determining the rate, and the interest payment dates for the debt
securities;
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- Any mandatory or optional redemption provisions;
- Any sinking fund or other provisions that would obligate Doral
Financial to repurchase or otherwise redeem the debt securities;
- Any provisions granting special rights to holders when a specified
event occurs;
- Any changes to or additional events of defaults or covenants;
- Any special tax implications of the debt securities, including
provisions for original issue discount securities, if offered; and
- Any other terms of the debt securities.
None of the indentures limits the amount of debt securities that may be
issued. Each indenture allows debt securities to be issued up to the principal
amount that may be authorized by Doral Financial and may be in any currency or
currency unit designated by Doral Financial. (Sections 3.01 and 3.03.)
DENOMINATIONS
Unless otherwise provided in the accompanying prospectus supplement, debt
securities will be issued in registered form in denominations of $1,000 each
and any multiples thereof. (Section 3.02.)
SUBORDINATION
Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities will generally be subordinated
and junior in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below). The subordinated indenture provides that no
payment of principal, interest and any premium on the subordinated debt
securities may be made unless Doral Financial pays in full the principal,
interest, any premium or any other amounts on any Senior Indebtedness then due.
If there is any insolvency, bankruptcy, liquidation or other similar
proceeding relating to Doral Financial, then all Senior Indebtedness must be
paid in full before any payment may be made to any holders of subordinated debt
securities. Holders of subordinated debt securities must deliver any payments
received by them to the holders of Senior Indebtedness until all Senior
Indebtedness is paid in full. (Subordinated debt indenture, Section 16.02.)
The Subordinated Indenture will not limit the amount of Senior
Indebtedness that Doral Financial may incur.
"Senior Indebtedness" means any of the following, whether incurred before
or after the execution of the subordinated debt indenture:
(1) all obligations of Doral Financial for the repayment of borrowed
money,
(2) all obligations of Doral Financial for the deferred purchase price of
property, but excluding trade accounts payable in the ordinary course
of business,
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(3) all capital lease obligations of Doral Financial,
(4) all obligations of the type referred to in clauses (1) through (3) of
other persons that Doral Financial has guaranteed or that is otherwise
its legal liability, and
(5) all obligations of Doral Financial in respect of derivative products
such as interest and foreign exchange rate contracts, commodity
contracts and similar items;
but Senior Indebtedness does not include:
(a) the subordinated debt securities; and
(b) indebtedness that by its terms is subordinated to, or ranks on
an equal basis with, the subordinated debt securities.
LIMITATIONS ON LIENS
The senior indenture provides that Doral Financial will not, and will not
permit any Subsidiary to, incur, issue, assume or guarantee any indebtedness
for money borrowed if such indebtedness is secured by a pledge of, lien on, or
security interest in any shares of Voting Stock of any Significant Subsidiary,
without providing that each series of senior debt securities and, at Doral
Financial's option, any other senior indebtedness ranking equally with the
senior debt securities, shall be secured equally and ratably with such
indebtedness. This limitation shall not apply to indebtedness secured by a
pledge of, lien on or security interest in any shares of Voting Stock of any
corporation at the time it becomes a Significant Subsidiary. (Senior debt
indenture, Section 12.06). The Subordinated Indenture does not contain a
similar provision.
"Significant Subsidiary" means a Subsidiary, including its Subsidiaries,
that meets any of the following conditions:
- Doral Financial's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 10 percent of the total assets of
Doral Financial and its Subsidiaries consolidated as of the end of
the most recently completed fiscal year;
- Doral Financial's and its other Subsidiaries' proportionate share of
the total assets of the Subsidiary after intercompany eliminations
exceeds 10 percent of the total assets of Doral Financial and its
Subsidiaries consolidated as of the end of the most recently
completed fiscal year; or
- Doral Financial's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items
and cumulative effect of a change in accounting principles of the
Subsidiary exceeds 10 percent of such income of Doral Financial and
its Subsidiaries consolidated for the most recently completed fiscal
year.
"Subsidiary" means any corporation of which securities entitled to elect
at least a majority of the corporation's directors shall at the time be owned,
directly or indirectly, by Doral Financial, and/or one or more Subsidiaries.
"Voting Stock" means capital stock the holders of which have general
voting power under ordinary circumstances to elect at least a majority of the
board of directors of a corporation, except capital stock that carries only the
right to vote conditioned on the happening of an event regardless of whether
such event shall have happened. (Senior debt indenture, Sections 1.01 and
12.06).
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CONSOLIDATION, MERGER OR SALE
Each indenture generally permits a consolidation or merger between Doral
Financial and another corporation. They also permit Doral Financial to sell all
or substantially all of its property and assets. If this happens, the remaining
or acquiring corporation shall assume all of Doral Financial's responsibilities
and liabilities under the indentures including the payment of all amounts due
on the debt securities and performance of the covenants in the indentures.
However, Doral Financial will only consolidate or merge with or into any
other corporation or sell all or substantially all of its assets according to
the terms and conditions of the indentures. The remaining or acquiring
corporation will be substituted for Doral Financial in the indentures with the
same effect as if it had been an original party to the indenture. Thereafter,
the successor corporation may exercise Doral Financial's rights and powers
under any indenture, in Doral Financial's name or in its own name. Any act or
proceeding required or permitted to be done by Doral Financial's board of
directors or any of its officers may be done by the board or officers of the
successor corporation. If Doral Financial merges with or into any other
corporation or sells all or substantially all of its assets, it shall be
released from all liabilities and obligations under the indentures and under
the debt securities. (Sections 10.01 and 10.02.)
MODIFICATION OF INDENTURES
Under each indenture, Doral Financial's rights and obligations and the
rights of the holders may be modified with the consent of the holders of a
majority in aggregate principal amount of the outstanding Debt Securities of
each series affected by the modification. No modification of the principal or
interest payment terms, and no modification reducing the percentage required
for modifications, is effective against any holder without its consent.
(Sections 11.01 and 11.02.)
EVENTS OF DEFAULT
The senior debt indenture provides that an "event of default" regarding
any series of senior debt securities will be any of the following:
- failure to pay interest on any debt security of such series for 30
days;
- failure to pay the principal or any premium on any debt security of
such series when due;
- failure to deposit any sinking fund payment when due by the terms of
a debt security of such series;
- failure to perform any other covenant in the indenture that continues
for 90 days after being given written notice;
- acceleration of the senior debt securities of any other series or any
other indebtedness for borrowed money of Doral Financial or any
Significant Subsidiary (as defined above), in each case exceeding
$5,000,000 in an aggregate principal amount;
- certain events involving bankruptcy, insolvency or reorganization of
Doral Financial; or
- any other event of default included in any indenture or supplemental
indenture. (Section 5.01.)
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The subordinated debt indenture provides that an "event of default"
regarding any series of subordinated debt securities will occur only upon
certain events involving bankruptcy, insolvency or reorganization of Doral
Financial. A default in the payment of principal or interest or in the
performance of any covenant or agreement in the subordinated debt securities of
any series or in the subordinated indenture is not an event of default under
the subordinated debt indenture and does not provide for any right of
acceleration of the payment of principal of a series of subordinated debt
securities. However, in the event of a default in the payment of principal or
interest, the holder of any debt security shall have the right to institute a
suit for the collection of such overdue payment.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under an indenture. The Trustee may withhold notice to the
holders of Debt Securities of any default (except in the payment of principal
or interest) if it considers such withholding of notice to be in the best
interests of the holders. (Section 6.02.)
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% in aggregate principal
amount of the debt securities of the series may declare the entire principal of
all the debt securities of that series to be due and payable immediately. If
this happens, subject to certain conditions, the holders of a majority of the
aggregate principal amount of the debt securities of that series can void the
declaration. (Section 5.02.)
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under any Indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. (Section 6.01.) If they provide this reasonable indemnification, the
holders of a majority in principal amount of any series of debt securities may
direct the time, method and place of conducting any proceeding or any remedy
available to the trustee, or exercising any power conferred upon the trustee,
for any series of debt securities. (Section 5.12.)
COVENANTS
Under the indentures, Doral Financial will:
- pay the principal, interest and any premium on the debt securities
when due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year
certifying as to the absence of events of default and to Doral
Financial's compliance with the terms of the indentures; and
- deposit sufficient funds with any paying agent on or before the due
date for any principal, interest or any premium.
PAYMENT AND TRANSFER
Principal, interest and any premium on fully registered securities will be
paid at designated places. Payment will be made by check mailed to the persons
in whose names the debt securities are registered on days specified in the
indentures or any prospectus supplement. Debt securities payments in other
forms will be paid at a place designated by Doral Financial and specified in a
prospectus supplement. (Section 3.07.)
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Fully registered securities may be transferred or exchanged at the
corporate trust office of the Trustee or at any other office or agency
maintained by Doral Financial for such purposes, without the payment of any
service charge except for any tax or governmental charge. (Section 3.05.)
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global certificates that will be deposited with a
depositary identified in a prospectus supplement. Unless it is exchanged in
whole or in part for debt securities in definitive form, a global certificate
may generally be transferred only as a whole unless it is being transferred to
certain nominees of the depositary. (Section 2.03.)
Unless otherwise stated in any prospectus supplement, The Depository Trust
Company, New York, New York ("DTC") will act as depositary. Beneficial
interests in global certificates will be shown on, and transfers of global
certificates will be effected only through records maintained by DTC and its
participants.
DEFEASANCE
Doral Financial will be discharged from its obligations on the senior debt
securities of any series at any time if it deposits with the trustee sufficient
cash or government securities to pay the principal, interest, any premium and
any other sums due to the stated maturity date or a redemption date of the
senior debt securities of the series. Doral Financial must also deliver to the
trustee an opinion of counsel to the effect that the holders of the senior debt
securities of that series will have no federal income tax consequences as a
result of such deposit. If this happens, the holders of the senior debt
securities of the series will not be entitled to the benefits of the senior
debt indenture except for registration of transfer and exchange of senior debt
securities and replacement of lost, stolen or mutilated senior debt securities.
(Senior debt indenture, Section 15.02.)
The subordinated debt indenture does not contain provisions for the
defeasance and discharge of Doral Financial's obligations on the subordinated
debt securities and the subordinated indenture.
DESCRIPTION OF PREFERRED STOCK
The following briefly summarizes the material terms of Doral Financial's
preferred stock, other than pricing and related terms which will be disclosed
in a prospectus supplement. You should read the particular terms of any series
of preferred stock offered by Doral Financial which will be described in more
detail in any prospectus supplement relating to such series, together with the
more detailed provisions of Doral Financial's restated certificate of
incorporation and the certificate of designation relating to each particular
series of preferred stock for provisions that may be important to you. The
restated certificate of incorporation and the form of certificate of
designation are filed as exhibits to the registration statement of which this
prospectus forms a part. A copy of the certificate of designation with respect
to any series of preferred stock will be filed with the SEC promptly after the
offering of such preferred stock. The prospectus supplement will also state
whether any of the terms summarized below do not apply to the series of
preferred stock being offered. For a description of Doral Financial's
outstanding preferred stock, see "Description of Capital Stock."
GENERAL
Under Doral Financial's restated certificate of incorporation, the board
of directors of Doral Financial is authorized to issue shares of preferred
stock in one or more series, and to establish from time to time a series of
preferred stock with the following terms specified:
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- the number of shares to be included in the series;
- the designation, powers, preferences and rights of the shares of the
series; and
- the qualifications, limitations or restrictions of such series,
except as otherwise stated in the restated certificate of
incorporation.
Prior to the issuance of any series of preferred stock, the board of
directors of Doral Financial will adopt resolutions creating and designating
the series as a series of preferred stock and the resolutions will be filed in
a certificate of designation as an amendment to the restated certificate of
incorporation. The term "board of directors of Doral Financial" includes any
duly authorized committee.
The preferred stock will be, when issued, fully paid and nonassessable.
Holders of preferred stock will not have any preemptive or subscription rights
to acquire more stock of Doral Financial.
The transfer agent, registrar, dividend disbursing agent and redemption
agent for shares of each series of preferred stock will be named in the
prospectus supplement relating to such series.
The rights of holders of the preferred stock offered may be adversely
affected by the rights of holders of any shares of preferred stock that may be
issued in the future. The board of directors may cause shares of preferred
stock to be issued in public or private transactions for any proper corporate
purpose. Examples of proper corporate purposes include issuances to obtain
additional financing in connection with acquisitions or otherwise, and
issuances to officers, directors and employees of Doral Financial and its
subsidiaries pursuant to benefit plans or otherwise. Shares of preferred stock
issued by Doral Financial may have the effect of rendering more difficult or
discouraging an acquisition of Doral Financial deemed undesirable by the board
of directors of Doral Financial.
RANK
Unless otherwise specified in the prospectus supplement relating to the
shares of any series of preferred stock, such shares will rank on an equal
basis with each other series of preferred stock and prior to the common stock
as to dividends and distributions of assets.
DIVIDENDS
Holders of each series of preferred stock will be entitled to receive cash
dividends, when, as and if declared by the board of directors of Doral
Financial out of funds legally available for dividends. The rates and dates of
payment of dividends will be set forth in the prospectus supplement relating to
each series of preferred stock. Dividends will be payable to holders of record
of preferred stock as they appear on the books of Doral Financial on the record
dates fixed by the board of directors. Dividends on any series of preferred
stock may be cumulative or noncumulative.
Doral Financial is a party to contracts that prevent it from paying
dividends if it does not comply with some terms of those contracts. In
addition, the agreement pursuant to which Doral Financial issued its 7.84%
Senior Notes due 2006, prohibits Doral Financial from paying dividends if the
aggregate amount of dividends paid on its capital stock, including all series
of preferred stock, would exceed the sum of the following:
- 50% of consolidated net income earned since October 1, 1996, and
prior to the end of the fiscal quarter ending not less than 45 days
prior to the proposed dividend payment date;
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- $15 million; and
- the net proceeds of any sale of capital stock after October 1, 1996.
Doral Financial may not declare, pay or set apart for payment dividends on
the preferred stock unless full dividends on any other series of preferred
stock that ranks on an equal or senior basis have been paid or sufficient funds
have been set apart for payment for
- all prior dividend periods of the other series of preferred stock
that pay dividends on a cumulative basis; or
- the immediately preceding dividend period of the other series of
preferred stock that pay dividends on a noncumulative basis.
Partial dividends declared on shares of preferred stock and any other
series of preferred stock ranking on an equal basis as to dividends will be
declared pro rata. A pro rata declaration means that the ratio of dividends
declared per share to accrued dividends per share will be the same for both
series of preferred stock.
Similarly, Doral Financial may not declare, pay or set apart for payment
non-stock dividends or make other payments on the common stock or any other
stock of Doral Financial ranking junior to the preferred stock until full
dividends on the preferred stock have been paid or set apart for payment for
- all prior dividend periods if the preferred stock pays dividends on a
cumulative basis; or
- the dividend period established in the certificate of designation for
each series of preferred stock if the preferred stock pays dividends
on a noncumulative basis.
CONVERSION OR EXCHANGE
The prospectus supplement for any series of preferred stock will state the
terms, if any, on which shares of that series are convertible into shares of
another series of preferred stock of Doral Financial. The preferred stock will
not be convertible into or exchangeable for shares of Doral Financial's common
stock.
If so determined by the board of directors of Doral Financial, the holders
of shares of preferred stock of any series may be obligated at any time or at
maturity to exchange such shares for preferred stock or debt securities of
Doral Financial. The terms of any such exchange and any such preferred stock or
debt securities will be described in the prospectus supplement relating to such
series of preferred stock.
REDEMPTION
If so specified in the applicable prospectus supplement, a series of
preferred stock may be redeemable at any time, in whole or in part, at the
option of Doral Financial or the holder thereof and may be mandatorily
redeemed.
Any partial redemptions of preferred stock will be made in a way that the
board of directors decides is equitable.
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Unless Doral Financial defaults in the payment of the redemption price,
dividends will cease to accrue after the redemption date on shares of preferred
stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up
of Doral Financial, holders of each series of preferred stock will be entitled
to receive distributions upon liquidation in the amount set forth in the
prospectus supplement relating to such series of preferred stock. Such
distributions will be made before any distribution is made on any securities
ranking junior relating to liquidation, including common stock.
If the liquidation amounts payable relating to the preferred stock of any
series and any other securities ranking on a parity regarding liquidation
rights are not paid in full, the holders of the preferred stock of such series
and such other securities will share in any such distribution of available
assets of Doral Financial on a ratable basis in proportion to the full
liquidation preferences. Holders of such series of preferred stock will not be
entitled to any other amounts from Doral Financial after they have received
their full liquidation preference.
VOTING RIGHTS
The holders of shares of preferred stock will have no voting rights,
except:
- as otherwise stated in the prospectus supplement;
- as otherwise stated in the certificate of designation establishing
such series; or
- as required by applicable law.
Under regulations adopted by the Federal Reserve Board, if the holders of
the preferred stock of any series become entitled to vote for the election of
directors because dividends on the preferred stock of such series are in
arrears, preferred stock of such series could be deemed a "class of voting
securities." In this instance, a holder of 25% or more of the preferred stock
of such series could then be subject to regulation as a bank holding company in
accordance with the Bank Holding Company Act. A holder of 5% or more of such
series that otherwise exercises a "controlling influence" over Doral Financial
could also be subject to regulation under the Bank Holding Company Act. In
addition, at any time a series of the preferred stock is deemed a class of
voting securities, (1) any other bank holding company may be required to obtain
the approval of the Federal Reserve Board to acquire or retain 5% or more of
the outstanding shares of such series of preferred stock, and (2) any person
other than a bank holding company may be required to file with the Federal
Reserve Board under the Change in Bank Control Act to acquire or retain 10% or
more of such series.
Section 12 of the Puerto Rico Banking Law requires that the Office of the
Commissioner of Financial Institutions of Puerto Rico approve any change of
control involving a bank organized under the Banking Law. The Banking Law
requires that the Office of the Commissioner be informed not less than 60 days
prior to any transfer of voting stock of a Puerto Rico bank that results in any
person owning, directly or indirectly, more than 5% of the outstanding voting
stock of the bank. For the purposes of Section 12 of the Banking Law, the term
"control" means the power to, directly or indirectly, direct or influence
decisively the administration or the norms of the bank. The Office of the
Commissioner has made an administrative determination that these provisions of
the Banking Law are applicable to a change in control of Doral Financial.
Pursuant to the Banking Law, if the Office of the Commissioner receives
notice of a proposed transaction that may result in a change of control of
Doral Financial, the Office of the Commissioner is required to investigate and
determine whether a change of control has occurred. The Office of the
Commissioner will issue an authorization for the transfer of control of Doral
Financial if the results of its investigations are in its judgment
satisfactory. The decision of the Office of the Commissioner is final and
unreviewable.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL
As of the date of this prospectus, Doral Financial is authorized to issue
50,000,000 shares of common stock, $1.00 par value, and 2,000,000 shares of
serial preferred stock, $1.00 par value. The following is a summary of certain
rights and privileges of the outstanding serial preferred stock. You should
read the more detailed provisions of Doral Financial's restated certificate of
incorporation, as amended, and the certificate of designation relating to any
series of preferred stock for provisions that may be important to you.
OUTSTANDING SERIAL PREFERRED STOCK
The general terms of Doral Financial's preferred stock are described above
under "DESCRIPTION OF PREFERRED STOCK." As of the date of this prospectus, the
8% Convertible Cumulative Preferred Stock (the "8% Preferred Stock") and the 7%
Noncumulative Monthly Income Preferred Stock, Series A (the "7% Preferred
Stock") described below are only two series of outstanding serial preferred
stock designated by Doral Financial.
8% PREFERRED STOCK
Doral Financial has outstanding 8,460 shares of 8% Preferred Stock. All
shares of 8% Preferred Stock are held by Popular, Inc. Popular acquired the 8%
Preferred Stock in a private transaction with Doral Financial, in which Popular
exchanged convertible debentures of Doral Financial in the principal amount of
$8.46 million it had previously acquired. Doral Financial entered into the
exchange because the 8% Preferred Stock qualified as Tier I capital for
purposes of compliance with the regulatory requirements applicable to bank
holding companies while the convertible debentures did not qualify for this
treatment.
Dividend Rights and Limitations. The holders of the shares of 8% Preferred
Stock are entitled to receive cumulative cash dividends when, as and if
declared by the board of directors, at the annual rate of 8% of the $1,000
liquidation preference thereof payable monthly. The holders of the 8% Preferred
Stock are entitled to receive such dividends prior to any payment of dividends
or distribution of assets to holders of the common stock and to any other class
of capital stock ranking junior to the 8% Preferred Stock with respect to the
payment of dividends.
Liquidation Rights. Upon the liquidation, dissolution or winding up of
Doral Financial, whether voluntary or involuntary, the holders of the 8%
Preferred Stock are entitled to receive out of the assets of Doral Financial an
amount in cash equal to $1,000 per share plus accrued and unpaid dividends
thereon to the date of the distribution. This distribution must be made before
any payment may be made to the holders of common stock or any other securities
of Doral Financial ranking junior to the 8% Preferred Stock as to the
distribution of assets upon liquidation. No distribution of this type or
payment on account of liquidation, dissolution or winding up of Doral Financial
may be made to the holders of the shares of any class or series of stock
ranking on a parity with the 8% Preferred Stock as to the distribution of
assets upon liquidation, unless the holders of the 8% Preferred Stock receive
like amounts ratably in accordance with the full distributive amounts which
they and the holders of parity stock are respectively entitled to receive upon
this preferential distribution.
After the payment to the holders of the 8% Preferred Stock of the full
preferential amounts provided for above, the holders of the 8% Preferred Stock
will have no right or claim to any of the remaining assets of Doral Financial.
Conversion Rights. The holders of shares of 8% Preferred Stock have the
right, at their option, to convert such shares for shares of common stock of
Doral Financial at any time on or before December 1, 2005, at a conversion
price of $4.375 per share, subject to adjustment from time to time upon the
occurrence of certain events. As of April 1, 1999, the 8,460 shares of 8%
Preferred Stock held by Popular were convertible into 1,933,714 shares of
common stock, or approximately 4.6% of the outstanding common stock.
Redemption. The 8% Preferred Stock is subject to redemption in whole or in
part, at the option of Doral Financial with the consent of the Federal Reserve
on or after January 1, 2001, and on or prior to December 31, 2002, at a price
of $1,020 per share and after this period at redemption prices declining to a
price of $1,000 per share on or after January 1, 2005. There is no mandatory
redemption or sinking fund obligation with respect to the 8% Preferred Stock.
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Voting Rights. The holders of shares of 8% Preferred Stock are not
entitled to any voting rights except as required by law or in connection with
any changes of the terms or rights of the 8% Preferred Stock.
Rank vis-a-vis 7% Preferred Stock. The 8% Preferred Stock will have the
same rank as the 7% Preferred Stock as to the payment of dividends and as to
the distribution of assets upon liquidation, dissolution or winding up of Doral
Financial.
7% PREFERRED STOCK
Doral Financial has outstanding 1,495,000 shares of 7% Preferred Stock.
Dividend Rights and Limitations. The holders of the shares of 7% Preferred
Stock are entitled to receive noncumulative cash dividends when, as and if
declared by the Board of Directors, at the annual rate of 7% of the $50
liquidation preference thereof payable monthly. The holders of the 7% Preferred
Stock are entitled to receive such dividends prior to any payment of dividends
or distribution of assets to holders of the common stock and to any other class
of capital stock ranking junior to the 7% Preferred Stock with respect to the
payment of dividends.
Liquidation Rights. Upon the liquidation, dissolution or winding up of
Doral Financial, whether voluntary or involuntary, the holders of the 7%
Preferred Stock are entitled to receive out of the assets of Doral Financial an
amount in cash equal to $50 per share plus accrued and unpaid dividends thereon
for the current monthly dividend period to the date of the distribution. This
distribution must be made before any payment may be made to the holders of
common stock or any other securities of Doral Financial ranking junior to the
7% Preferred Stock as to the distribution of assets upon liquidation. No
distribution of this type or payment on account of liquidation, dissolution or
winding up of Doral Financial may be made to the holders of the shares of any
class or series of stock ranking on a parity with the 7% Preferred Stock as to
the distribution of assets upon liquidation, unless the holders of the 7%
Preferred Stock receive like amounts ratably in accordance with the full
distributive amounts which they and the holders of parity stock are
respectively entitled to receive upon this preferential distribution.
After the payment to the holders of the 7% Preferred Stock of the full
preferential amounts provided for above, the holders of the 7% Preferred Stock
will have no right or claim to any of the remaining assets of Doral Financial.
Conversion Rights. The shares of 7% Preferred Stock are not convertible
into or exchangeable for any other securities of Doral Financial.
Redemption. The 7% Preferred Stock is subject to redemption in whole or in
part, at the option of Doral Financial with the consent of the Federal Reserve
on or after February 28, 2004 and on or prior to February 27, 2005, at a price
of $51 per share and after this period at redemption prices declining to a
price of $50 per share on or after February 28, 2006. There is no mandatory
redemption or sinking fund obligation with respect to the 7% Preferred Stock.
Voting Rights. The holders of shares of 7% Preferred Stock are not
entitled to any voting rights except (1) if Doral Financial does not pay
dividends in full on the 7% Preferred Stock for 18 consecutive monthly dividend
periods, (2) as required by law or (3) in connection with any changes of the
terms or rights of the 7% Preferred Stock.
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Rank vis-a-vis Series A Preferred Stock. The 7% Preferred Stock will have
the same rank as the 8% Preferred Stock as to the payment of dividends and as
to the distribution of assets upon liquidation, dissolution or winding up of
Doral Financial.
PLAN OF DISTRIBUTION
Doral Financial may sell the offered securities (1) through agents; (2) to
or through underwriters or dealers; (3) directly to one or more purchasers; or
(4) through a combination of any of these methods of sale.
The prospectus supplement relating to an offering of offered securities
will set forth the terms of such offering, including:
- - the name or names of any underwriters, dealers or agents;
- - the purchase price of the offered securities and the proceeds to Doral
Financial from such sale;
- - any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation;
- - the initial public offering price;
- - any discounts or concessions to be allowed or reallowed or paid to
dealers; and
- - any securities exchanges on which such offered securities may be listed.
Any initial public offering prices, discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
BY AGENTS
Offered securities may be sold through agents designated by Doral
Financial. Any agent involved in the offer or sale of the offered securities in
respect of which this prospectus is delivered will be named, and any
commissions payable by Doral Financial to such agent will be set forth, in the
prospectus supplement relating to that offering. Unless otherwise indicated in
such prospectus supplement, the agents will agree to use their reasonable best
efforts to solicit purchases for the period of their appointment.
BY UNDERWRITERS
If underwriters are used in the offering, the offered securities will be
acquired by the underwriters for their own account. The underwriters may resell
the securities from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The securities may be either offered to the
public through underwriting syndicates represented by one or more managing
underwriters or by one or more underwriters without a syndicate. The
obligations of the underwriters to purchase the securities will be subject to
certain conditions. The underwriters will be obligated to purchase all the
securities of the series offered if any of the securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers may be changed from time to time.
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In connection with underwritten offerings of the offered securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions that stabilize, maintain or otherwise affect
the market price of the offered securities at levels above those that might
otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids, each of
which is described below.
- - A stabilizing bid means the placing of any bid, or the effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of a
security.
- - A syndicate covering transaction means the placing of any bid on behalf of
the underwriting syndicate or the effecting of any purchase to reduce a
short position created in connection with the offering.
- - A penalty bid means an arrangement that permits the managing underwriter
to reclaim a selling concession from a syndicate member in connection with
the offering when offered securities originally sold by the syndicate
member are purchased in syndicate covering transactions.
These transactions may be effected in the over-the-counter market, or
otherwise. Underwriters are not required to engage in any of these activities,
or to continue such activities if commenced.
DIRECT SALES
Offered securities may also be sold directly by Doral Financial. In this
case, no underwriters or agents would be involved.
GENERAL INFORMATION
Doral Financial may have agreements with the underwriters, dealers and
agents to indemnify them against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribute with respect to
payments which the underwriters, dealers or agents may be required to make.
Each series of offered securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom offered
securities are sold for public offering and sale may make a market in such
offered securities, but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given that there will be a market for the offered securities.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, Doral Financial or its subsidiaries in the ordinary
course of their businesses.
WHERE YOU CAN FIND MORE INFORMATION
Doral Financial files annual, quarterly and current reports, proxy
statements and other information with the SEC. Doral Financial has also filed
with the SEC a registration statement on Form S-3, to register the securities
being offered by this prospectus. This prospectus, which forms part of the
registration statement, does not contain all of the information included in the
registration statement. For further information about Doral Financial and the
securities offered in this prospectus, you should refer to the registration
statement and its exhibits.
You may read and copy any document filed by Doral Financial with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further
21
<PAGE> 23
information on the operation of the Public Reference Room. Doral Financial
files its SEC materials electronically with the SEC, so you can also review
Doral Financial's filings by accessing the web site maintained by the SEC at
http://www.sec.gov. This site contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the SEC.
The SEC allows Doral Financial to "incorporate by reference" the
information it files with them, which means that it can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus.
Information that Doral Financial files later with the SEC will automatically
update and supersede information in this prospectus. In all cases, you should
rely on the later information over different information included in this
prospectus or the prospectus supplement. Doral Financial has previously filed
the following documents with the SEC and is incorporating them by reference
into this prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1998; and
- Current Reports on Form 8-K, dated January 12, 1999, February 22,
1999 and April 13, 1999.
Doral Financial also incorporates by reference, from the date of the
initial filing of the registration statement, all documents filed by it with
the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange
Act of 1934 after the date of this prospectus and until Doral Financial sells
all of the securities being offered by this prospectus.
You may request a copy of these filings at no cost, by writing or
telephoning Doral Financial at the following address:
Doral Financial Corporation
Attn.: Mario S. Levis, Executive
Vice President & Treasurer
1159 Franklin D. Roosevelt Ave.
San Juan, Puerto Rico 00920
(787) 749-7108
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. Doral Financial has
not authorized anyone else to provide you with different information. Doral
Financial is not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents.
LEGAL OPINIONS
Unless otherwise specified in the applicable prospectus supplement,
Pietrantoni Mendez & Alvarez LLP, will issue an opinion about the legality of
the offered securities for Doral Financial. Unless otherwise specified in the
applicable prospectus supplement, any underwriters will be advised about
certain issues relating to any offering by Brown & Wood LLP.
EXPERTS
PricewaterhouseCoopers LLP, independent accountants, audited Doral
Financial's financial statements incorporated by reference in this prospectus
and elsewhere in the registration statement. These financial statements are
incorporated by reference herein in reliance on the report of
PricewaterhouseCoopers LLP given on the authority as experts in auditing and
accounting in giving the report.
22
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the offering all of which will be borne by
the Registrant are as follows (all amounts are estimates except for the SEC
Registration fee):
<TABLE>
<S> <C>
SEC registration fee............................................................ $ 69,500
NASD Fee........................................................................ 20,500
Printing expenses............................................................... 75,000
Legal fees and expenses......................................................... 225,000
Accounting fees and expenses.................................................... 70,000
Trustees and registrar's fees and expenses...................................... 30,000
Rating Agency fees.............................................................. 320,000
Listing fees.................................................................... 30,000
Miscellaneous................................................................... 20,000
--------
Total.................................................................. $860,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Article 1.02(B)(6) of the Puerto Rico General Corporation Act
(the "PR GCA") provides that a corporation may include in its certificate of
incorporation a provision eliminating or limiting the personal liability of
members of its board of directors or governing body for breach of a director's
fiduciary duty of care. However, no such provision may eliminate or limit the
liability of a director for breaching his duty of loyalty, failing to act in
good faith, engaging in intentional misconduct or knowingly violating a law,
paying a dividend or approving a stock repurchase which was illegal, or
obtaining an improper personal benefit. A provision of this type has no effect
on the availability or equitable remedies, such as injunction or rescission,
for breach of fiduciary duty. Article Seventh of Doral Financial's Restated
Certificate of Incorporation contains such a provision.
(b) Article 4.09 of the PR GCA authorizes Puerto Rico
corporations to indemnify their officers and directors against liabilities
arising out of pending or threatened actions, suits or proceedings to which
they are or may be made parties by reason of being directors or officers. Such
rights of indemnification are not exclusive of any other rights to which such
officers or directors may be entitled under any by-law, agreement, vote of
stockholders or otherwise. The Restated Certificate of Incorporation of Doral
Financial provides that Doral Financial shall indemnify its directors, officers
and employees to the fullest extent permitted by law. Doral Financial also
maintains directors' and officers' liability insurance on behalf of its
directors and officers.
(c) Section 1 of Article IX of Doral Financial's By-laws (the
"By-laws") provides that Doral Financial shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of Doral Financial)
by reason of the fact that he is or was a director, officer, employee or agent
of Doral Financial or is or was serving at the request of Doral Financial as a
director, officer, employer or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the
II-1
<PAGE> 25
best interests of Doral Financial, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 2 of Article IX of the By-laws provides that Doral Financial
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of Doral Financial to procure a judgment in its favor by reason of the fact
that such person acted in any of the capacities set forth above, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards set forth in the preceding paragraph, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to Doral Financial unless and only to the
extent that the court in which such action or suit was brought shall determine
that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 3 of Article IX of the By-laws provides that to the extent a
director or officer of Doral Financial has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
Sections 1 and 2 of Article IX of the By-laws or in the defense of any claim,
issue, or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Section 5 of Article IX of the By-laws provides that Doral Financial
shall pay expenses incurred in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding. Doral Financial must make such advanced payments if it receives an
undertaking by or on behalf of any person covered by Section 1 of Article IX of
the By-laws to repay such amounts, if it is ultimately determined that he is
not entitled to be indemnified by Doral Financial as authorized in Article IX
of the By-laws.
Sections 6 and 7 of Article IX of the By-laws provide that
indemnification provided for by Sections 1 and 2 of Article IX of the By-laws
shall not be deemed exclusive of any other rights to which the indemnified
party may be entitled; and that Doral Financial may purchase and maintain
insurance on behalf of a director or officer of Doral Financial against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not Doral Financial would have the
power to indemnify him against such liabilities under such Sections 1 and 2 of
Article IX of the By-laws.
ITEM 16. LIST OF EXHIBITS
<TABLE>
<S> <C>
1.1** Form of Distribution Agreement for Debt Securities.
1.2** Form of Universal Shelf Underwriting Agreement.
4.1** Senior Indenture.
4.2** Form of Senior Note
4.3** Subordinated Indenture.
4.4** Form of Subordinated Note
4.5** Form of Certificate of Designations, Preferences and Rights
of Preferred Stock.
</TABLE>
II-2
<PAGE> 26
<TABLE>
<S> <C>
4.6*** Specimen Preferred Stock Certificate.
5.1** Opinion of Pietrantoni Mendez & Alvarez LLP regarding
legality of the Preferred Stock and the Debt Securities.
12.1* Statement of Computation of Ratios of Earnings to Fixed
Charges and Earnings to Fixed Changes and Preferred Stock
Dividends.
23.1** Consent of Pietrantoni Mendez & Alvarez LLP (included in
Exhibit 5.1).
23.2* Consent of PricewaterhouseCoopers LLP.
24.1* Powers of Attorney (included at page II-5).
25.1*** Statement of Eligibility of Senior Trustee on Form T-1.
25.2*** Statement of Eligibility of Subordinated Trustee on Form T-1.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by a pre-effective amendment to the Registration Statement.
*** To be incorporated by reference from a Current Report on Form 8-K.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section
10(a) (3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
II-3
<PAGE> 27
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the Registration Statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions in Item 15, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering hereof.
The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939, as amended
(the "Act"), in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
II-4
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly cause this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in San Juan, Puerto Rico, on the 12th day of April, 1999.
DORAL FINANCIAL CORPORATION
By: /s/ Salomon Levis
-------------------------------------------------
Salomon Levis
Chairman of the Board and Chief Executive Officer
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Salomon Levis and Richard F. Bonini and each of them, each with full
power to act without the other, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Salomon Levis Chairman of the Board and April 12, 1999
- --------------------------------------------------- Chief Executive Officer
Salomon Levis
/s/ Richard F. Bonini Senior Executive Vice April 12, 1999
- --------------------------------------------------- President, Chief Financial Officer
Richard F. Bonini and Director
/s/ Ricardo Melendez Vice President and April 12, 1999
- --------------------------------------------------- Chief Accounting Officer
Ricardo Melendez
/s/ A. Brean Murray Director April 12, 1999
- ---------------------------------------------------
A. Brean Murray
/s/ Edgar M. Cullman, Jr. Director April 12, 1999
- ---------------------------------------------------
Edgar M. Cullman, Jr.
/s/ John L. Ernst Director April 12, 1999
- ---------------------------------------------------
John L. Ernst
/s/ Efraim M. Kier Director April 12, 1999
- ---------------------------------------------------
Efraim M. Kier
/s/ Zoila Levis Director April 12, 1999
- ---------------------------------------------------
Zoila Levis
/s/ Victor M. Pons, Jr. Director April 12, 1999
- ---------------------------------------------------
Victor M. Pons, Jr.
</TABLE>
II-5
<PAGE> 1
DORAL FINANCIAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS
EARNINGS:
Pre-tax income from continuing operations $ 59,839 $ 37,797 $31,279 $22,060 $18,745
Plus:
Fixed Charges (excluding capitalized interest) 115,894 62,269 47,130 44,442 23,996
-------- -------- ------- ------- -------
TOTAL EARNINGS $175,733 $100,066 $78,409 $66,502 $42,741
======== ======== ======= ======= =======
FIXED CHARGES:
Interest expensed and capitalized $114,396 $ 60,912 $45,857 $43,380 $23,252
Amortized premiums, discounts, and capitalized
expenses related to indebtedness 544 526 586 372 83
An estimate of the interest component within rental expense 1,080 831 687 690 661
-------- -------- ------- ------- -------
TOTAL FIXED CHARGES 116,020 62,269 47,130 44,442 23,996
======== ======== ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES 1.51 1.61 1.66 1.50 1.78
======== ======== ======= ======= =======
EXCLUDING INTEREST ON DEPOSITS
EARNINGS:
Pre-tax income from continuing operations $ 59,839 $ 37,797 $31,279 $22,060 $18,745
Plus:
Fixed Charges (excluding capitalized interest) 98,456 52,255 41,604 41,081 22,891
-------- -------- ------- ------- -------
TOTAL EARNINGS $158,295 $ 90,052 $72,883 $63,141 $41,636
======== ======== ======= ======= =======
FIXED CHARGES:
Interest expensed and capitalized $ 96,916 $ 50,898 $40,331 $40,019 $22,147
Amortized premiums, discounts, and capitalized
expenses related to indebtedness 544 526 586 372 83
An estimate of the interest component within rental expense 1,080 831 687 690 661
-------- -------- ------- ------- -------
TOTAL FIXED CHARGES 98,540 52,255 41,604 41,081 22,891
RATIO OF EARNINGS TO FIXED CHARGES 1.61 1.72 1.75 1.54 1.82
======== ======== ======= ======= =======
</TABLE>
<PAGE> 2
DORAL FINANCIAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERENCE SECURITY DIVIDENDS
EXHIBIT 12.1
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS
EARNINGS:
Pre-tax income from continuing operations $ 59,839 $ 37,797 $31,279 $22,060 $18,745
Plus:
Fixed Charges (excluding capitalized interest) 115,894 62,269 47,130 44,442 23,996
-------- -------- ------- ------- -------
TOTAL EARNINGS $175,733 $100,066 $78,409 $66,502 $42,741
======== ======== ======= ======= =======
FIXED CHARGES:
Interest expensed and capitalized $114,396 $ 60,912 $45,857 $43,380 $23,252
Amortized premiums, discounts, and capitalized
expenses related to indebtedness 544 526 586 372 83
An estimate of the interest component within rental expense 1,080 831 687 690 661
-------- -------- ------- ------- -------
TOTAL FIXED CHARGES BEFORE PREFERRED DIVIDENDS 116,020 62,269 47,130 44,442 23,996
-------- -------- ------- ------- -------
Preferred dividend requirements 676 130 14 187 325
Ratio of pre tax income to net income 1.133 1.161 1.156 1.127 1.198
-------- -------- ------- ------- -------
PREFERRED DIVIDEND FACTOR 766 151 16 211 389
-------- -------- ------- ------- -------
TOTAL FIXED CHARGES AND PREFERENCE SECURITY DIVIDENDS $116,786 $ 62,420 $47,147 $44,653 $24,386
======== ======== ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERENCE SECURITY DIVIDENDS 1.50 1.61 1.67 1.49 1.76
======== ======== ======= ======= =======
EXCLUDING INTEREST ON DEPOSITS
EARNINGS:
Pre-tax income from continuing operations $ 59,839 $ 37,797 $31,279 $22,060 $18,745
Plus:
Fixed Charges (excluding capitalized interest) 98,456 52,255 41,604 41,081 22,891
-------- -------- ------- ------- -------
TOTAL EARNINGS $158,295 $ 90,052 $72,883 $63,141 $41,636
======== ======== ======= ======= =======
FIXED CHARGES:
Interest expensed and capitalized $ 96,916 $ 50,898 $40,331 $40,019 $22,147
Amortized premiums, discounts, and capitalized
expenses related to indebtedness 544 526 586 372 83
An estimate of the interest component within rental expense 1,080 831 687 690 661
-------- -------- ------- ------- -------
TOTAL FIXED CHARGES BEFORE PREFERRED DIVIDENDS 98,540 52,255 41,604 41,081 22,891
-------- -------- ------- ------- -------
Preferred dividend requirements 676 130 14 187 325
Ratio of pre tax income to net income 1.133 1.161 1.156 1.127 1.198
-------- -------- ------- ------- -------
PREFERRED DIVIDEND FACTOR 766 151 16 211 389
-------- -------- ------- ------- -------
TOTAL FIXED CHARGES AND PREFERENCE SECURITY DIVIDENDS $ 99,306 $ 52,406 $41,621 $41,292 $23,281
======== ======== ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERENCE SECURITY DIVIDENDS 1.59 1.72 1.76 1.53 1.79
======== ======== ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 23.2
[PricewaterhouseCoopers LLP Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 5, 1999, appearing on Page F-2
of Doral Financial Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998. We also consent to the reference to us under the heading
"Experts."
/s/PricewaterhouseCoopers LLP
San Juan, Puerto Rico
April 14, 1999
