Debt leverage + CC TranscriptThis is the exchange on leveraging debt. It's very interesting. Todd Coupland
Okay. And what is the right leverage on the business, I guess with choppy WiLAN results, although they generate a lot of cash when they happen? How are you thinking about that?
Paul Hill
Well, I wouldn't necessarily assume, you would leverage the entire business. You might for example leverage only the acquired asset, right?
Todd Coupland
I see.
Paul Hill
So -- or the ITS components of our business as opposed to the entire Quarterhill group.
Todd Coupland
Okay. Okay. Fair enough.
Paul Hill
There's different strategies you can take from a debt standpoint.
John Rim
The basic concept though would be that, as we acquire companies, they become the collateral, right? And then, the cash they generate, they need to be able to service any financing that we get. So the leverage levels that we pick are going to be incredibly conservative, so that we're comfortably within any sort of financial covenants generally multiples of EBITDA in terms of debt leverage and very safe fixed cost coverage ratios. It just obviously enhances our capability to accelerate and move on opportunities quicker and optimize our capital allocation.
Todd Coupland
Okay. Okay. So, $145 million cash probably $40 million $50 million cash to keep in the business. So you sort of have $100 million to start and then, what you generate plus the leverage possibilities of what you're going to buy. Is that sort of the right way to think about it?
John Rim
Yes, although, I would just caution with the $40 million to $50 million. I mean we've mentioned that before in the past. I mean that is quite a healthy level. I mean the basic concept there in our WiLAN business is with IP patent infringement litigation, we want to demonstrate the ability to go long and that's critical because we're not going to settle. We're going to optimize those opportunities. But really, the cash that we hold, it's really dependent on the circumstances at the time. So, it could be less as well.
Full transcript:
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