When the economy struggles, businesses typically hunker down and preserve cash by cutting spending and dividends. During the Covid-19 slowdown, companies controlled by private-equity firms have often gone the other way, borrowing heavily to pay big dividends to their owners, the Wall Street Journal reported. The payouts boost returns for private-equity firms but can load their companies’ balance sheets with heavy debt at a precarious moment. The maneuvers can leave companies in weaker financial shape, while helping private-equity firms lock in gains, often a few years after their initial investments. The amount of issued debt tied to such payouts, including both loans and bonds, grew to more than $29 billion this year, up more than 25 percent from 2019, according to S&P Global Market Intelligence’s LCD. Of that, loan volumes have grown well over 40 percent while bonds have fallen.
