UPDATE 1-Doral Financial shareholders approve buyout

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NEW YORK, July 17 (Reuters) - Doral Financial Corp (DRL.N) shareholders on Tuesday approved a takeover of the Puerto Rico lender by a group led by Bear Stearns Cos.' BSC.N private equity arm, helping to avert a possible bankruptcy.

The buyout group offered $610 million for a 90 percent stake, valuing Doral at 63 cents per share. Proceeds from the buyout are to be used to help Doral repay $625 million of debt due on July 20.

San Juan-based Doral expects the transaction to close on July 19. It has said it would likely seek bankruptcy protection if it did not close by the following day.

About 95 percent of shareholders who voted on the proposals, representing a majority of outstanding shares, voted in favor of the buyout, Doral said.

Doral had been Puerto Rico's largest mortgage lender before accounting problems forced it to restate 2000 to 2004 results.

The U.S. Securities and Exchange Commission fined Doral $25 million in September for overstating pretax earnings by $921 million for that 2000 to 2004 period.

Several regulators have approved the buyout. Earlier on Tuesday, at a hearing in Manhattan, U.S. District Judge Richard Owen approved a $129 million settlement of securities lawsuits related to the restatement.

Doral is paying $94 million, while its insurers will pay $34 million and individual defendants $1 million. Approval of the settlement was also a condition of the buyout.

Bear Stearns Merchant Banking leads the buyout group. Other members include Canyon Capital Advisors, Eton Park Capital Management, General Electric Co.'s (GE.N) GE Asset Management, Goldman Sachs Group Inc. (GS.N), Marathon Asset Management, Perry Capital, D.E. Shaw Group and Tennenbaum Capital Partners.

Doral shares closed Tuesday up 1 cent at $1.15 on the New York Stock Exchange. They have fallen 98 percent since peaking in January 2005, wiping out more than $5 billion of market value. Doral's market value is about $123 million. (Reporting by Paritosh Bansal, Martha Graybow and Jonathan Stempel; Writing by Jonathan Stempel)