A stubbornly difficult exit environment for private equity sponsors, paired with generally favorable credit market conditions this year, continues to create ideal circumstances for dividend recapitalization loans. As of Dec. 8, sponsors paid themselves $43.6 billion of dividends from the US broadly syndicated loan market, already the highest annual total since the Global Financial Crisis. The 2025 tally is 24% above the recent high-water mark of $35.1 billion in 2021, when the cost of debt was at historic lows.
Overall, PE-backed companies issued $70.2 billion in leveraged loans for dividend recapitalizations through Dec. 8. Not all of the money raised will go to the private equity owners, however, as most of these transactions also refinance existing debt. This year’s total already exceeds that of every full year except 2021, when PE-backed companies issued $73.2 billion, and it stands slightly above the 2024 total of $68.3 billion.
In 2025, nearly 30 PE-backed companies have completed dividend recapitalizations involving debt raises of $1 billion or more across the leveraged loan and high-yield bond markets. Parexel is in the market with a $4.072 billion term loan B due December 2031 to refinance an existing term loan and fund a one-time shareholder distribution that will total $1.5 billion, according to S&P. The company’s existing covenant-lite TLB due November 2028 was originally issued in August 2021 to finance the buyout of the company by EQT and the private equity business of Goldman Sachs Asset Management.
PE inventory swells
The stock of PE-backed companies continues to expand, and age. According to PitchBook data, US PE inventory has grown to nearly 12,900 companies as of Q3 2025, with 30% of current PE-backed assets now held for seven years or more, and another 37% in the early stages of maturity, at four to six years. Exits remain especially sluggish for the large, 2021 vintage — only 17% of those deals have realized an exit four years post-investment, compared with 32% of the 2017 buyout cohort at the same point in time.
Although the PE inventory is starting to cycle at a faster pace, the mounting volume of aging PE-backed assets is expected to continue weighing on the market. In response, sponsors are increasingly turning to dividend recapitalizations to return capital to LPs, supported by a lending environment that remains receptive to such transactions.
With private-equity owners holding their portfolio companies for longer, the time lag between the initial buyout and the latest dividend recap financed through the BSL market has lengthened to 4.5 years, from 3.6 years in 2021. Some 22% of the companies completing a dividend recap in 2025 have been held by their sponsor for at least seven years, while another 29% returned to the market much sooner, less than two years post-LBO, often via an add-on transaction.
For example, Sauer Brands placed a $90 million add-on term loan B, which will be fungible with the existing covenant-lite TLB due February 2032, to fund a distribution to shareholders. The original TLB was issued in February 2025 to finance Advent International’s $1.5 billion acquisition of the company. Meanwhile, Envestnet recently closed a $400 million fungible add-on to its covenant-lite term loan B due November 2031. The existing TLB was issued in September 2024 to back the take-private buyout of the company by Bain Capital in a deal valued at $4.4 billion.
Dividend payouts are growing. The average dividend size of recapitalizations financed in the broadly syndicated market this year is $449 million, the highest level in at least seven years, up from $433 million in 2024 and $386 million in 2021. LCD has tracked 21 transactions this year in which the dividend exceeded $1 billion, after 23 last year and compared with 20 in 2021. The median dividend size is $280 million this year, versus $300 million in 2024 and 2021, although it remains above pre-pandemic levels.
Pricing has been attractive for issuers as a persistent lack of net supply, combined with heavy investor demand, has pushed borrowing spreads to multiyear lows across the credit quality spectrum. The average institutional spread for dividend recap deals in 2025 is 323 bps, the lowest level since the Global Financial Crisis. However, the yield to maturity, which takes into account the base rate, is 7.72%. That’s down from 9.37% last year but is nearly three points above the post-crisis low in 2021, at 4.95%.
With debt costs remaining above long-term averages, leverage metrics for dividend recapitalizations have not reverted to the aggressive levels of earlier cycles, though some signs of increased risk tolerance are emerging. BSL-financed deals closed this year averaged 5.2x pro forma debt/EBITDA, up from below 5x in 2023 and 2024 but still trailing levels from 2018 to 2022. Moreover, 22% of transactions were levered at 6x or more post-dividend, higher than in the prior two years yet far more conservative than the 46% share observed in 2021.
That said, sponsors are adding more leverage to fund these transactions as financing costs ease and risk appetite improves. For the 2025 cohort, PE owners layered on roughly one additional turn of leverage through the recapitalization, with average pre-dividend leverage at 4.2x. By comparison, 2023 and 2024 deals began with sub-4x leverage, and added about 0.8x turns through the recap.
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