Deals
Private Equity Won’t Stop Gorging on Debt to Pay Investors
- Firms turn to loan market for funds to cut checks to investors
- Move raises leverage while sponsors wait for exit opportunity
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Private equity investors are clamoring for their payouts. A risky approach to meeting their demands is setting records — and getting more popular.
Dividend recapitalizations, where owners of lower-rated companies raise debt in the firm’s name to hand cash to investors, have soared in the first half of 2024. Some $30.2 billion of leveraged loans to pay for these checks have been sold so far this year, according to PitchBook LCD data, matching the amount in 2021, which was the most in at least a decade.