Also found in: Wikipedia.
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.
The act of a publicly-traded company borrowing a significant amount of capital and using it either to pay an extraordinary dividend or to buy back a portion of its own stock. Leveraged recapitalization increases the company's liabilities (because of the extra debt) while reducing its equity. This can make it less attractive to potential acquirers. As a result, leveraged recapitalization is used most often as an anti-takeover measure. See also: Shark repellent.
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.