Doral Financial Corp. (NYSE: DRL), a Puerto Rico-based financial services company, has announced the preliminary settlement of the securities class action pending against the company in the S.D.N.Y. The case was filed in 2005 and alleges that Doral improperly accounted for its derivative portfolio of interest-only strips.
The settlement is for $130 million, consisting of payments from Doral ($95 million), its insurers ($34 million), and one or more individual defendants ($1 million). Doral also agreed to certain corporate governance changes. Because of Doral’s precarious financial situation, the settlement is contingent on the company’s ability to obtain outside funding for its business.