Forget Clawbacks. Meet "Reverse Dividend Recaps."
It always looks bad when a buyout-backed company collapses under its debt load. It looks even worse when that buyout firm has already made a profit on the company. That's what happened today with structured settlement company J.G. Wentworth, which filed for Chapter 11 this morning. Private equity firm JLL Partners bought the company in 2005. Since then, it's profited handsomely on the investment. From Buyouts: The shop has taken out 2x its initial investment through two recapitalizations, and over the summer it sold $145 million worth of equity on a private exchange run by Bear Stearns. The private placement paid off J.G. Wentworth's second-lien debt and valued JLL Partners's remaining equity position at $450 million, generating a 6.1x return on its original $125 million investment, Rodriguez said.
