leveraged recapitalization

Leveraged Recapitalization

A strategy where a company takes on significant additional debt with the purpose of either paying a large dividend or repurchasing shares. The result is a far more financially leveraged company.

Notes:

This is often used in risk arbitrage. It is also a form of shark repellent.

See also: Leverage, Risk Arbitrage, Shark Repellent, Stub

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Leveraged recapitalization

Often used in risk arbitrage. A public company takes on significant additional debt with the purpose of either paying an extraordinary dividend or repurchasing shares, leaving the public shareholders with a continuing interest in a more financially leveraged company. Popular form of shark repellent See: Stub.

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leveraged recapitalization

A corporate reorganization in which borrowed funds are used to pay a large one-time dividend to shareholders. The result is a company with greater financial risk because of increased debt and reduced equity. In some instances the dividend is paid in shares of stock rather than cash to inside shareholders who increase their proportional ownership and control.