Since acquiring Goodman Fielder, a company four times its size, we've been quite worried about the level of debt at Burns Philp. In fact, last time we covered the stock, in issue 141/Nov 03 (SELL-$0.61), we commented on the rather dangerous negative cash flow for the three months to 30 September 2003. 'We have no idea what the next quarter will bring but with only $93m left in the bank, shareholders should pray for positive cash flow.' Well it seems our 'conservatism' was warranted, with Burns Philp announcing the planned sale of its Tones herbs and spices business in the US. This led one of the more cynical members of our team to suggest that the stock should be renamed Goodman Fielder given that, with the exception of the yeast business, that's where all the company's assets will have come from. Scepticism aside, we view a successful sale as a step forward for the company, especially if the proceeds are all used to pay down debt - although that's unlikely. The company has stated that 25% of any proceeds are required to go towards debt reduction under the group's financing arrangements. With an acquisitive track record, we doubt deputy chairman and major shareholder Graeme Hart plans to give all the remaining proceeds to the banks. And even if the company were to achieve an unexpectedly high $500m for the business and use it all to pay down debt, it wouldn't make a huge dent in the group's $2.6bn of net debt. But at least it's a step in the right direction. We'll be keeping an eye on developments but, for now, we remain cautious and recommend you SELL.