P.E. Portfolio Companies Lever Up To Pay Out

Aug 7 2013 | 10:05am ET

Amidst fears that interest rates may soon rise, private equity-owned companies are taking on record amounts of debt to pay those owners.

Some $47.4 billion in new loans and bonds have been sold by companies to pay dividends to their p.e. owners, according to S&P Capital IQ LCD, a 62% increase from the same period last year. The borrowing spree puts p.e.-owned companies on track to easily break the record they set last year, with $64.2 billion in debt taken on to pay dividends.

Some 60% of all bonds sold by p.e.-owned companies last month were used to pay dividends, up from the 14% average for the year. And many of the loans are of the riskier variety, with low credit ratings and low interest rates, The Wall Street Journal reports.

Private equity firms are racing to take advantage of those low rates, after a bond-market slump in May and June.


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