Q: You've mentioned a few times that TVK has higher debt levels. Generally I would take a pass on high debt but did buy some a while back and have done okay. Is there reason to be concerned by the level of debt today? Under what scenarios would it be a problem, and what are your thoughts on the likelihood of those scenarios?
Thanks.
Thanks.
5i Research Answer:
Debt of course can work both ways. It becomes more of a problem during recessionary periods or when a company experiences growth or cash flow issues. In the past year TVK had $58M in interest charges, against cash flow (operating) of $171M. There is a large cushion over interest charges, and has been for at least the past three years. Recessions are part of a business cycle, but we would not really expect one in the short term. We would not be too concerned on the debt level as TVK does have good growth potential. But due to debt and its small size we would limit position size just as an extra caution.