Insight Center: Webinars

Private Equity: Executing a Successful Leveraged Dividend Recapitalization

Speakers: Andrew Hulsh, Jennifer E. Daly and Jeffrey Pawlitz

1:00-2:30 PM (EDT)
Private Equity: Executing a Successful Leveraged Dividend Recapitalization

Presented by Strafford Publications, Inc.

In a leveraged dividend recapitalization, the private equity investor seeks to realize value from the forward-looking cash flows of a private company while retaining its ownership interest in the business. This is accomplished with new debt and payment of a dividend funded with the loan proceeds. Since 2012, private equity firms have arranged hundreds of such transactions totaling over $150 billion.

The additional debt burden can pose risks which must be addressed in advance by counsel and the company’s directors. If not properly underwritten, a dividend recapitalization can threaten the solvency of the company, potentially resulting in claims of fraudulent conveyance, breach by portfolio company directors of their fiduciary duties, and payment of distributions in violation of statutory requirements under state law.

Listen as our authoritative panel reviews the general structure of a leveraged dividend recapitalization, and the financial stress and potential claims which might result from the additional indebtedness. The panel will also discuss risk mitigation strategies—including insolvency analysis, obtaining a solvency opinion and implementation of an independent decision-making process by the board of directors—which should be implemented before proceeding with a dividend recapitalization.

Key topics include:

  • When is a leveraged dividend recapitalization appropriate for a privately held company?
  • What are the risks to consider before proceeding with this type of recapitalization?
  • How are present and future solvency evaluated and what is a solvency opinion?
  • What steps should be taken to avoid actual or perceived conflicts of interest on the part of directors in approving recapitalization?

CLE credit available.

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