Doral Financial Downgraded

The long-term issuer rating of Doral Financial Corp., a mortgage lender based in San Juan, Puerto Rico, has been lowered from BB-minus to B-plus by Fitch Ratings.Among other rating changes, Fitch also downgraded Doral's senior debt from BB-minus to B and its preferred stock from B to CCC-plus, and lowered the long-term issuer rating of Doral Bank, a subsidiary, from BB to BB-minus. The ratings remain on Rating Watch Negative. Fitch said the actions stemmed from "a combination of near-term and long-term challenges." The former include the refinancing of $625 million of unsecured debt coming due July 20, 2007, and low capital levels, although Fitch added that Doral is still well capitalized by regulatory standards. The long-term challenges include regulatory restrictions on Doral Bank, capitalization levels, poor operational performance in 2006, the potential financial impact of lawsuits, and the change of Doral's business model from that of a mortgage company to that of a full-service bank.