  We generalize the Poland-Scheraga (PS) model to the case of a circular DNA,
taking into account the twisting of the two strains around each other. Guided
by recent single-molecule experiments on DNA strands, we assume that the
torsional stress induced by denaturation enforces formation of supercoils whose
writhe absorbs the linking number expelled by the loops. Our model predicts
that, when the entropy parameter of a loop satisfies $c \le 2$, denaturation
transition does not take place. On the other hand for $c>2$ a first-order
denaturation transition is consistent with our model and may take place in the
actual system, as in the case with no supercoils. These results are in contrast
with other treatments of circular DNA melting where denaturation is assumed to
be accompanied by an increase in twist rather than writhe on the bound
segments.
