With so many big recaps in the mix, 2012 has been the year of the dividend for PE firms. Consider that as of Aug. 10 Standard & Poor's Leveraged Commentary & Data has tracked $13 billion of dividends financed with leveraged loans, versus $18 billion of equity invested in new leveraged buyouts. That means that sponsors collectively have withdrawn 72 cents of dividends for every dollar of fresh capital they've invested in a new LBO (again, this is for deals backed by leveraged loans). Said another way, 43% of PE capital flow has been out of issuers via dividends -- surpassing the prior high of 33%, from 2010.Private equity Underwriter (PEU) driven liquidlty recaps are like home equity loans, where proceeds go into the owner's pocket and not into improvements.
There have been 52 dividend deals alone so far this year through which PE firms have extracted 60% of their original capital commitment, on average.Every time interest expense goes up, how many jobs are eliminated? It's but one strategy in the PEU monetization game.
Update 9-4-12: The Carlyle Group wants a liquidity recap for RAC, a British roadside assistance company. Carlyle took over RAC sans pension. It looks like Carlyle wants to pull $300 million from RAC via a special dividend, debt funded.