Private equity-owned companies are again raising debt to pay their owners dividends, just as warnings sound about saddling businesses with more leverage in the midst of a downturn.
This month Baltic telecommunication firm Bite and U.S.-based Epicor Software Corp. have both turned to the leveraged debt market for deals that will pave the way for so-called dividend recapitalizations, where private equity firms have a portfolio company borrow more in order to return money to their owners.
Bite, backed by Providence Equity Partners, has earmarked roughly €200 million ($232 million) from an issue of senior debt to pay shareholders. About $560 million of the proceeds from the loan being sold by Epicor will be used for a payout to KKR & Co.
The deals mark a quiet return for debt-funded payouts to shareholders, which were popular with buyout firms prior to the onset of the COVID-19 pandemic, only to screech to a halt as the virus began to grip countries and their economies in March.