easy · Private Equity pe-core
What is the primary rationale for a PE sponsor to execute a 'Dividend Recapitalization' during the holding period of a portfolio company?
- To accelerate returns and de-risk the investment by returning a portion of capital to LPs before an exit.
- To comply with maintenance covenants that require the company to maintain a certain debt-to-equity ratio.
- To increase the company's EBITDA by reducing interest-bearing debt on the balance sheet.
- To prepare the company for an IPO by cleaning up the equity section of the balance sheet.
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