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Gold/Mining/Energy : Canadian Oil & Gas Companies

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To: RIK who wrote (4484)	1/14/1998 8:28:00 PM
From: Kerm Yerman	Read Replies (4) of 24927

RIK / Discounted Debt There was one other area I forgot to mention in my last reply to you. You said "I believe many debt ladden companies have already been discounted and that companies that are so encumbered present ideal take-over candidates." It's not so much that debt is discounted, rather than factored. It can be usually be seen (between the lines interpetation) in their cash flow multiple. Have you ever seen two very similar companies in terms of growth and operations and yet, one sells at a multiple of 5X cash flow while the other sells at 6.3X cash flow. Upon a closer look, you will find that the the company selling at 5X cash flow has a considerable amount of debt compared to the other. As far as a debt ladden company being a candidate for a take over. It's not that other companies are targeting the debt ladden company for takeover ---- the debt ladden company itself would pursue other companies to buy them out.

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