What Is A Dividend Recapitalization ("dividend Recap")?

1.	What Is A Dividend Recapitalization ("dividend Recap")?
Answer» In a dividend recap, the company takes on NEW debt solely to pay a special dividend out to the PE firm that bought it. It would be like if you made your friend take out a PERSONAL loan just so he/she could pay you a lump SUM of CASH with the loan PROCEEDS. As you might guess, dividend recaps have developed a bad reputation, though they're still commonly used. In a dividend recap, the company takes on new debt solely to pay a special dividend out to the PE firm that bought it. It would be like if you made your friend take out a personal loan just so he/she could pay you a lump sum of cash with the loan proceeds. As you might guess, dividend recaps have developed a bad reputation, though they're still commonly used.

Answer»

In a dividend recap, the company takes on NEW debt solely to pay a special dividend out to the PE firm that bought it.

It would be like if you made your friend take out a PERSONAL loan just so he/she could pay you a lump SUM of CASH with the loan PROCEEDS.

As you might guess, dividend recaps have developed a bad reputation, though they're still commonly used.

In a dividend recap, the company takes on new debt solely to pay a special dividend out to the PE firm that bought it.

It would be like if you made your friend take out a personal loan just so he/she could pay you a lump sum of cash with the loan proceeds.

As you might guess, dividend recaps have developed a bad reputation, though they're still commonly used.

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