Elah Holdings Inc fka RELYQ (ELLH)

[Enterprising Investor]

Timing? What to look for...

There are three ways to invest in this turnaround: 1) Common (FMNTQ); 2) Preferred (FMNPQ) and Sr Notes (FMGC.GB). The choice comes down to risk/return. The Common has no upper limit. The upper limits for the Preferred and Sr Notes is par - $25 and 100 respectively, with an outside shot of accrued dividends and interest. Today's prices were $4.50 and 48.02.

The Sr Notes have held up well in the 40 to 50 range.

Listed below is the Preferred info from FINRA:
Price Avg 50-day: $3.95
Price Avg 200-day: $3.82
Vol Avg 50-day: 6,400
Vol Avg 200-day: 21,200
52-wk High: $6.00
52-wk Low: $0.0100

Did it really trade at $.01?

Can you imagine if a person bought the Preferred today at $4.50 and then at some point the Preferred starts paying a $2.25 dividend annually? Two things would happen. The price would move towards par (capital appreciation) and the yield on invested capital would be 50 percent per year ($2.25/$4.50).

Well... I did today. I have done the same thing with adjustable-rate preferred stocks of banks receiving TARP money - GS and BAC (old ML paper) with more money in GS than BAC. If Buffett wants to $5 billion, it has to be safer. [Disclosure: I do work in the correspondent mortgage business of a very large, NY-based bank receving TARP money.]

Going back to the issue of timing. The Sr Notes and Preferred will become more active/move up over time because people in the know (non-Committee members) buying in or increasing stakes. Please do not get me wrong. The upside on the common could be HUGE! My only concern for the Common is the burn rate of cash caused by legal fees running about $800,000 per month.

Does anyone know what drives the income/loss swings in "Investment in Subsidiary"?