Dividend Recapitalization


DEFINITION of 'Dividend Recapitalization'

When a company incurs a new debt in order to pay a special dividend to private investors or shareholders. This usually involves a company owned by a private investment firm, which can authorize a dividend recapitalization as an alternative to selling its equity stake in the company.

Also known as a "dividend recap".

BREAKING DOWN 'Dividend Recapitalization'

The dividend recap has seen explosive growth, primarily as an avenue for private investment firms to recoup some or all of the money they used to purchase their stake in a business. It is generally not looked upon favorably by creditors or common shareholders because it reduces the credit quality of the company while only benefiting a select few.

  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Capital Structure

    A mix of a company's long-term debt, specific short-term debt, ...
  3. Debt Financing

    When a firm raises money for working capital or capital expenditures ...
  4. Shareholders' Equity

    A firm's total assets minus its total liabilities. Equivalently, ...
  5. Special Dividend

    A non-recurring distribution of company assets, usually in the ...
  6. Hedge

    Making an investment to reduce the risk of adverse price movements ...
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