A non-profit company is sending half a billion to its shareholders. How could this turn out?

This stock is a textbook example of what is known as a “levered equity stub”—a thin sliver of equity sitting atop a massive pile of debt. The company has a market capitalization of around $960 million, but its enterprise value reaches $9.3 billion. In other words, roughly 90% of the company’s total value consists of debt, and only a fraction belongs to shareholders. This alone makes the stock an extremely leveraged bet: even a small change in operating performance or interest expenses will have a magnified effect on the stock price, both up and down.

And then there’s the peculiarity that has the company in the spotlight right now. A company burdened with over $8 billion in debt has decided to return roughly half a billion dollars to shareholders—not in cash, however, but in the form of newly issued 9% preferred shares. So instead of reducing its debt, it is taking on another fixed obligation. The question for an investor isn’t “Is this cheap?”—because relative to cash flow, it’s…