Dividend Recapitalization

Your company was plunking along, doing just fine. It had no growth, but stable, solid earnings. And happily for you, interest rates on debt were cheap and easy.

So you decided to turbo-charge the equity returns, or equity investment piece of your company's story. The company has had, for five years now, $20M in earnings each year. It has almost no cash and no debt. So...given that the company only has four owners, it decides to take a loan of $60M and dividend that money out to its four owners in one fell swoop.

The company then has $60M of debt, a little bit of cash, and with its $20M in mostly cash earnings, it stands to pay off its loans in full in three years and change. If it executes, the company will have done a dividend recapitalization to the benefit of its four horsemen owners.