Magazine article American Banker

Street Responds Quickly to Issues at W Holding

Magazine article American Banker

Street Responds Quickly to Issues at W Holding

Article excerpt

Analysts and investors took W Holding Co. Inc.'s saying it may have to restate some results as more bad news for Puerto Rican banking companies.

W Holding, of Mayaguez, announced after the market closed Monday that it would postpone filing fourth-quarter financial results while it determines the appropriate accounting for interest-only strips and mortgages.

The company is reviewing its accounting for mortgages it bought in 2000 to 2005 from Doral Financial Corp., another Puerto Rican banking company, which sold mortgages to several companies that have announced pending restatements.

"It is becoming a broken record in Puerto Rico -- more accounting issues are causing financial-statement delays," wrote Thomas Monaco, an analyst with Moors & Cabot Capital Markets, in a research note.

R&G Financial Corp. and First BanCorp, both of Puerto Rico, also bought mortgages from Doral, and both are restating earnings.

W Holding bought fixed-rate mortgages from Doral at a variable rate with no cap, according to Omotayo Okusanya 2d, an analyst with UBS Securities LLC.

W Holding said it must determine whether these transactions could be classified as "true sales" instead of commercial loans secured by mortgages. If not, it may need to take a $12.7 million noncash charge in the fourth quarter. A W Holding spokeswoman would not comment further.

Eric Rothmann, an analyst at Brean Murray, Carret & Co. LLC, downgraded shares of W Holding to "hold" Tuesday.

W Holding's announcement also affects Doral, which could face a $40 million to $60 million charge connected to W Holding's pending restatement, according to Mr. …

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