Elah Holdings Inc fka RELYQ (ELLH)

[Enterprising Investor]

Common shareholders own 100 percent today.

Preferred shareholders will receive cash and 35 percent of the New Common Stock via the Plan.

Common shareholders will receive 16 percent under the Plan. If the class votes in favor, an additional 4 percent will be allocated. The result would then be a 20 percent stake.

Preferred and common shareholders will control between 51 and 55 percent of the New Common Stock.

Why is 51 percent important?

The Debtor also has substantial tax attributes (the NOLs described above), the Debtor’s use of which could become subject to severe limitations under Sections 382 and 383 of the IRC in the event there is an “ownership change” of the Debtor as defined in Section 382 of the IRC. Generally, an “ownership change” occurs if the percentage (by value) of the stock of a corporation owned by one or more 5% shareholders has increased by more than 50 percentage points over the lowest percentage of stock owned by such shareholders at any time during the three-year testing period ending on the date of the ownership change. The Debtor anticipates that the issuance of New Common Stock pursuant to the SPA and the Plan will cause the Debtor to have an “ownership change.” However, there is an exception in Section 382(l)(5) of the IRC, which provides that an “ownership change” of a debtor corporation occurring under the jurisdiction of a bankruptcy court in a title 11 case will not cause the debtor’s tax attributes to be limited under Sections 382 or 383 of the IRC if the shareholders and certain qualified creditors of the debtor corporation (determined immediately before such “ownership change”) own (after such “ownership change” and as a result of being shareholders or creditors immediately before such change) at least 50% of the stock of the debtor corporation. The Debtor believes that it will be eligible for this bankruptcy exception under Section 382(l)(5) of the IRC and that, as a result, its NOLs will not be limited because of the “ownership change” occurring as a result of the closing of the Plan. However, because the Debtor will rely on this bankruptcy exception, its then-remaining NOLs will be reduced to zero if it undergoes another “ownership change” within two years after the effective date of the Plan. The provisions of the New Organizational Documents, including the Charter Amendment and the Rights Agreement Amendment, that restrict future buying and selling of the New Common Stock are intended to minimize the possibility that such a second “ownership change” might occur.

Everyone needs to put there thinking caps on and vote FOR the plan.

Where is my ballot? o:)