Private equity firms slash use of risky debt tactic to fund payouts

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The story "Private equity firms slash use of risky debt tactic to fund payouts" was covered 2 days ago by Financial Times, a news publisher based in United States.

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Financial Times 2d ago

Private equity firms slash use of risky debt tactic to fund payouts - Financial Times

Quick Summary:

So-called net asset value loans used to pay dividends fell by about 90 per cent during the second half of last year following heightened criticism from investors, according to 17 Capital, a New York based specialist lender that has pioneered the market.

But the approach has proved controversial with private equity investors, because the extra debts have added new risks to their portfolios by exposing an entire fund’s investments to the possibility that just a few of its deals sour.

Investors in private equity funds told the Financial Times they had grown increasingly suspicious of the NAV loan-funded dividends and had devoted additional resources to understand private equity firms’ motives.