Private Equity Has a Plan If IPOs Don’t Work: Add Debt
- ‘Triple track’ options open to PE for portfolio companies
- Dividend recaps enabled by strong credit market, CLO revival
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Booming credit markets are throwing private equity firms a lifeline as they strive to return cash to investors: Instead of relying on the IPO market, they can pile portfolio companies with more debt and give themselves a payout.
Dividend recapitalizations, where a firm borrows money for a payout to its owners, are an increasingly popular alternative to the usual dual-track options of listing or selling portfolio companies, according to multiple bankers. The strategy has been used in recent deals such as Clarios International Inc.’s debt sale, and red-hot demand for corporate bonds and loans means more are likely to follow, bankers said.