Private Equity's Dividend Loans: A Growing Trend

Private equity firms are resorting to dividend loans to pay out investors, with these loans reaching nearly twenty-nine billion dollars this year. This strategy involves portfolio companies taking on new debt, distributing the money to the private equity firm and its investors. The trend is driven by the slow market for initial public offerings and mergers and acquisitions, making it difficult for firms to deliver promised returns. Thoma Bravo, for instance, arranged a seven hundred fifty million dollar loan for Darktrace to fund a distribution to its shareholders, a move deemed aggressive due to high debt levels. This controversial strategy is becoming more common as firms seek ways to unlock cash and satisfy investors in a challenging market.The Daily News Now! — Every city. Every story. AI-powered. Hosted on Acast. See acast.com/privacy for more information.