medium · Private Credit & Debt portfolio-management-monitoring-workouts
A PE fund manager executes a 'dividend recapitalization' by adding $100M of debt to a portfolio company and using the proceeds to pay a dividend.
What is the primary impact on the fund's performance multiples?
- The RVPI increases as the residual value of the company is enhanced by the additional leverage.
- The IRR decreases because the company's interest expense reduces net income.
- The TVPI multiple increases because the debt is now an asset of the fund.
- The DPI multiple increases immediately while the IRR benefits from the accelerated timing of the cash flow.
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