In fact, Booz Allen’s $1 billion payout looks a little paltry compared with others.
The government consulting firm is just one of many PE-backed companies issuing dividends this year, and many are going to the sponsors. Moody’s Investors Service estimates there have been at least 35 debt-financed dividend recaps so far this year (through June). These transactions were worth more than $11 billion at companies controlled by PE firms, Moody’s said.
While popular with private equity, these distributions are controversial. Mitt Romney has been criticized because his former firm, Bain Capital, extracted dividends from companies that later went into Chapter 11.
Why so many dividends? With M&A so slow and the IPO market in seeming stasis, private equity has lacked exit opportunities this year. Credit markets, however, were strong earlier in 2012.
I’ve asked several PE execs, if LPs get annoyed by all the dividends being doled out. Money is money, I’m told, and distributions are a valuable way to get money back to LPs. Also, many PE firms think their companies are under-levered and now there is room to boost debt, Moody’s said in a recent report. Some PE firms, like KPS Capital Partners, even publicize all the dividend recaps they’ve done recently.
So here are the top 5 dividends so far this year, according to S&P Capital IQ Leveraged Commentary & Data.
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Attachmate was in the market earlier this year for a $1.5 billion recap loan. Proceeds were to pay a $580 million dividend to Attachmate’s PE sponsors, according to LeveragedLoan.com.
Three PE firms—Francisco Partners, Golden Gate and Thoma Bravo—own Attachmate