Just To Recap

The world is divided between those who think that the leveraged debt market is overheated, and those who know it is. And for both camps, as surely as the arrival of pumpkin pie mix on supermarket end caps heralds turkey day, the appearance of ranks of dividend recaps on loan and high-yield shelves is a vivid sign of investor over-exuberance. PE sponsors recapitalizing portfolio companies just to take out cash they had put into the original LBO were once features of a late-stage market. But the velocity of market cycles is such today that recaps occur at the beginning. It took six years after the dot com crash for leveraged wackiness to return. This round it’s taken six months.

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