The theory behind this is, a stable company should have plenty of debt, as it can easily pay it off (because it's stable), and is generally cheaper than equity.

The theory behind this is, a stable company should have plenty of debt, as it can easily pay it off (because it's stable), and is generally cheaper than equity. A company should also have only as much cash as it needs, else management will waste it So a private equity company sees a company like Remington, with too much cash and not enough debt. It borrows a lot, buys it, and minimizes cash reserves. This tends to increase the market cap substantially However, this obviously has some downsides, if you don't get the default risks just right...