Dividend Recap
A capital-structure event in which a portfolio company issues new debt and uses the proceeds to pay a dividend to the sponsor (equity holder). The transaction increases the company's leverage, accelerates a portion of the equity return to mid-hold cash distribution, and does NOT require an exit. From an LBO IRR perspective, the dividend recap is one of the highest-leverage timing tools: a $100M dividend recap at year 3 of a 5-year hold lifts equity IRR by roughly 200-400 bps without changing MoIC. From a credit perspective, the recap increases default risk by adding leverage; from an LP perspective, it accelerates DPI (distributions-to-paid-in) and shapes the IRR curve favorably.
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Related terms
Absorption Rate · AFFO per Share · Allowed Return on Equity · Alternative Investments · Anchor Tenant · Assets Under Management
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