Zeev's Turnips Patch-No Politics (ZEEV)

[Zeev Hed]

SNDK's return on assets (including the debt) is 14% plus, the interest paid on the debt is 4% plus, why call the debt? You are using OPM and make a net 10% on it ($15 MM per year), unless you plan to reissue such debt under better terms? There might have been covenants forbidding additional debt unless that note was redeemed, and thus calling it in now make sense. Of course, SNDK has more than a billion in cash bringing in probably no more than 1% to 3% and under this circumstance, if the cash is not going to be used soon for capex, it makes a lot of sense to call in debt that cost at least 1% more than what they get on their cash. For some reason (beyond my comprehension) the street like companies to be debt free, I like companies to have some debt, particularly when return on assets in the business is much greater that the cost of capital. Mind you, not excessive debt, just a nice little chunk.