First BanCorp (the “Corporation”) (NYSE: FBP), the bank holding company
for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today filed a
Form 8-K that disclosed that the United States Bankruptcy Court for the
Southern District of New York has denied the Bank’s Motion for Summary
Judgment filed in connection with its claim to recover certain assets
posted as collateral with Lehman Brothers, Inc. ("Lehman").
This matter relates to the claim that the Bank filed against Barclays
Capital (“Barclays”) in the Bank’s attempt to recover the securities (or
the cash equivalence thereof) that were posted as collateral in
connection with certain interest hedge agreements executed with a Lehman
affiliate. Since the second quarter of 2009, the Corporation classified
the pledged securities as a non-performing asset with a book value of
$64.5 million. Because of the bankruptcy court’s May 10, 2013 decision,
the Corporation has determined that it is probable that the asset has
been impaired and will recognize a non-cash charge associated with the
impairment of approximately $64.5 million, plus $2.1 million in accrued
interest, during the second quarter of 2013 to write-off the carrying
value of the pledged securities. The Bank intends to appeal the court’s
decision denying its Motion for Summary Judgment.
In addition to this lawsuit, the Corporation continues to pursue its
claim filed in the bankruptcy court in January 2009 in the proceedings
under the Securities Investor Protection Act (“SIPA”) with regard to
Lehman. The Corporation’s claim was filed on the basis that under SIPA
the Corporation was a “customer” that “entrusted” the pledged securities
to Lehman for safe keeping, and, accordingly, should be afforded
protection thereunder. The Corporation’s claim has not yet been resolved
by the court.
“Over the past three years we have been diligently working with counsel
in this litigation and have been reporting the status of the litigation
in our corporate filings. Based on Friday’s court decision, we have
determined to take the full impairment charge. We will continue our
efforts through the legal process to recover the value of the assets
that we strongly believe belong to the Corporation. Despite the impact
of this charge in the second quarter, our capital ratios will remain
strong,” said First BanCorp.'s President and CEO Aurelio Aleman.
About First BanCorp
First BanCorp. is the parent corporation of FirstBank Puerto Rico, a
state-chartered commercial bank with operations in Puerto Rico, the
Virgin Islands and Florida, and of FirstBank Insurance Agency. First
BanCorp. and FirstBank Puerto Rico operate within U.S. banking laws and
regulations. The Corporation operates a total of 153 branches,
stand-alone offices, and in-branch service centers throughout Puerto
Rico, the U.S. and British Virgin Islands, and Florida. Among the
subsidiaries of FirstBank Puerto Rico are First Federal Finance Corp., a
small loan company; FirstBank Puerto Rico Securities, a broker-dealer
subsidiary; First Management of Puerto Rico; and FirstMortgage, Inc., a
mortgage origination company. In the U.S. Virgin Islands, FirstBank
operates First Express, a small loan company. First BanCorp’s shares of
common stock trade on the New York Stock Exchange under the symbol FBP.
Additional information about First BanCorp. may be found at www.firstbankpr.com.
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