Private Equity is Raising Dividend-Linked Debt Like It’s 2007
- Portfolio companies face diminished credit ratings or outlooks
- Some firms not growing fast enough to compensate for payouts
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Europe’s private equity patrons are piling debt onto the books of their companies to support dividend payouts, a move which could threaten these firms’ prospects when the fiscal and monetary stimulus of the pandemic era starts to wind down.
Just under 13 billion euros ($16 billion) of leveraged loan deals linked to dividend recapitalizations took place by early June -- the highest level in 14 years -- according to S&P Global Market Intelligence’s Leveraged Commentary & Data unit. That’s only 4 billion euros shy of the total for the same period in 2007, on the eve of the great financial crisis.