Ellington Financial LLC (EFC), a Greenwhich, CT-based specialty finance company that invests in RMBS and derivatives, is expected to price its IPO this week.
Business Overview (from prospectus)
Ellington Financial LLC is a specialty finance company formed in August 2007 that specializes in acquiring and managing mortgaged-related assets. Our primary objective is to generate attractive, risk-adjusted total returns for our shareholders by making investments that we believe compensate us appropriately for the risks associated with them. We seek to attain this objective by utilizing an opportunistic strategy. Our targeted assets currently include: residential mortgage-backed securities, or RMBS, backed by prime jumbo, Alternative A-paper, or Alt-A, and subprime residential mortgage loans, or non-Agency RMBS; RMBS for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity, or Agency RMBS; mortgage-related derivatives; and derivatives on corporate debt and equity securities.
Offering: 7.7 million shares at $25-$27 per share. Net proceeds of approximately $157.1 million will be used to acquire RMBS, mortgage-related derivatives including credit default swaps on individual RMBS and on the ABX indices and other targeted assets.
Our shareholders’ equity resulting from operations increased by $30.1 million and $80.5 million during the three and nine month periods ended September 30, 2009, respectively... Net investment income was $2.2 million for the three month period ended September 30, 2009 as compared to $4.3 million for the three month period ended September 30, 2008... Interest income was $14.3 million for the three month period ended September 30, 2009 as compared to $9.1 million for the three month period ended September 30, 2008... During the three month period ended September 30, 2009, we had net realized and unrealized gains on investments of $35.6 million as compared to net realized and unrealized losses on investments of $(12.4) million for the three month period ended September 30, 2008.
In acquiring our assets, we compete with mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities. Many of our competitors are significantly larger than us, have greater access to capital and other resources and may have other advantages over us. In addition to existing companies, other companies may be organized for similar purposes, including companies focused on purchasing mortgage assets. A proliferation of such companies may increase the competition for equity capital and thereby adversely affect the market value of our common shares. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of assets and establish more relationships than us.
Additionally, we may also compete with (i) the Federal Reserve and the Treasury to the extent they purchase assets meeting our objectives pursuant to various purchase programs and (ii) companies that partner with and/or receive financing from the U.S. Government, including TALF and PPIP participants.