Private equity owners pile on leverage to pay themselves dividends
TPG, Apax load companies with loans, seizing on strong demand for high-yielding debt
Private equity groups including TPG and Apax Partners are taking advantage of blockbuster demand for corporate debt by loading companies they own with fresh loans and using the cash to award themselves a bumper payday.
So-called dividend recapitalisations have become a feature of the loan market in recent weeks, ringing alarm bells since they come on top of already high leverage and weak investor protections and against a backdrop of economic uncertainty.
So far in September, almost 24 per cent of money raised in the US loan market has been used to fund dividends to private equity owners, up from an average of less than 4 per cent over the past two years. That would be the highest proportion since the beginning of 2015, according to monthly data from S&P Global Market Intelligence.
Source: Joe Rennison | Financial Times