Dividend recapitalization further leverages a company so that a special dividend is paid to owners. Owners can recoup their investments in 2 - 4 yrs. This is the kind of greed that caused the Financial crisis…
I don’t see why they are connected. Can you elaborate?
I do not even remember where I read that in the curriculum. where is that thing again in the curriculum?
Basically DVD recap = take out loan to pay shareholder / private equity investor special DVD. You can find it in volume 5 i think (alternative investment)
I got it. It a way for equity holder in PE to cash in. I get it. This is not greed at all, pple invest and accept the stress for risky their money in the PE firm. Now the product is working,AllLevelsPass and everyone else wants to buys, therefore, the business model work. It is time to cash in baby. This is NOT greed at all but instead they accept the risk and now they are being rewarded for the investment by getting some DVD Recap.
tibwa - I believe you are mistaken. If it sounds like greed, smells like greed, looks like greed…well gosh darn it…it might just in fact be greed. Here are the general logistics: They are dead for now since the credit markets are frozen. -Dividend recaps have been used in LBOs. Basically PE firms overpay by acquiring firms with low cost debt in the form of levered loans. -Instead of putting their money where their mouth is, they immediately use these proceeds to cash themselves out of the company (read no longer at risk) and it doesn’t really matter what happens to the company since there is a zero possibility of loss. -Most of the time, companies have incredibly large amount of debt outstanding in relation to the amount of equity fronted. These companies typically end up hobbling along because they are short on cash and their operations are substantially impaired -bankruptcy? reorg? -The locusts move on to the next victim
AllLevelsPass Wrote: ------------------------------------------------------- > Dividend recapitalization further leverages a > company so that a special dividend is paid to > owners. Owners can recoup their investments in 2 - > 4 yrs. > > This is the kind of greed that caused the > Financial crisis… The end result of a div. recap is no different than a buyout. In either case, you wind up with a relatively highly leveraged company. So are you suggesting that PEs applying leverage “caused” the financial crisis? News to me. I’m not quite sure but I recall hearing something about “sub-prime” lending and MBS recently. I wonder if these had anything to do with the crisis.
If you think this caused the financial crisis you should be demoted to level 1. The financial crisis was caused by the ridiculous growth of home equity which is now destroying every bank’s balance sheet which in turns throws companies in the deep end. The ‘crisis’ is the cure for heroine shot we’ve had the last five years. Withdrawal hurts. It is pretty healthy afterwards, though.
mcpass Wrote: ------------------------------------------------------- > The financial crisis was caused by the ridiculous > growth of home equity aka - all of those bright people who used their home equity as an ATM machine. “New car? No problem! Big screen? Of course! We’ll just draw on our home equity line. Yeehaw!”
I think what AllLevelsPass was trying to say was that the same mentality caused this financial crisis. I believe he is attacking the systematic greed, not just one instance. I could be wrong - just trying to play devils advocate.
ValueAddict Wrote: ------------------------------------------------------- > tibwa - I believe you are mistaken. If it sounds > like greed, smells like greed, looks like > greed…well gosh darn it…it might just in fact > be greed. Here are the general logistics: > > They are dead for now since the credit markets are > frozen. > -Dividend recaps have been used in LBOs. > Basically PE firms overpay by acquiring firms with > low cost debt in the form of levered loans. > -Instead of putting their money where their mouth > is, they immediately use these proceeds to cash > themselves out of the company (read no longer at > risk) and it doesn’t really matter what happens to > the company since there is a zero possibility of > loss. > -Most of the time, companies have incredibly large > amount of debt outstanding in relation to the > amount of equity fronted. These companies > typically end up hobbling along because they are > short on cash and their operations are > substantially impaired > -bankruptcy? reorg? > -The locusts move on to the next victim i feel your pain. Where you working for Madeoff or this dude they have talking about this week, I mean stanford?
I did not say Div. Recap caused the financial crisis. I said, this kind of greed, caused the financial crisis. Two different things. Why heavily leverage a company to cash out? Aren’t companies supposed to turn out dividends from their profits? Com’n! Its the same greed that made bankers give subprime lending all in the name of cashing out a huge bonus. Greed! Thats what governs the financial markets.
Nonsense, greed hasn’t changed the last 10 years, it’s human nature. Bankers give subprime lending because the government was PUSHING for more people to buy houses and reduced interest rates to ridiculous levels. Bankers simply didn’t want that risk on their balance sheet and created beautiful products in which the risk could be hidden and sold off to investors worldwide. The government knew it and let it happen. That’s not greed, that’s bad politics. The funny thing is that the Fred tries to solve it by… reducing interest rates. Right, as if we need people to take on more debt.
Its that human nature (and greed that hasn’t changed in the last 10 years), that has caused bankers to take the risk off their balance sheets by using products, PE firms to take out their risk by carrying out dividend recap even when the company is dying… However, the lower rates i believe is to make people borrow considering the fear in the system now. then people start borrowing and get greedy… The cycle start all over again…
tibwa Wrote: ------------------------------------------------------- > ValueAddict Wrote: > -------------------------------------------------- > ----- > > tibwa - I believe you are mistaken. If it > sounds > > like greed, smells like greed, looks like > > greed…well gosh darn it…it might just in > fact > > be greed. Here are the general logistics: > > > > They are dead for now since the credit markets > are > > frozen. > > -Dividend recaps have been used in LBOs. > > Basically PE firms overpay by acquiring firms > with > > low cost debt in the form of levered loans. > > -Instead of putting their money where their > mouth > > is, they immediately use these proceeds to cash > > themselves out of the company (read no longer > at > > risk) and it doesn’t really matter what happens > to > > the company since there is a zero possibility > of > > loss. > > -Most of the time, companies have incredibly > large > > amount of debt outstanding in relation to the > > amount of equity fronted. These companies > > typically end up hobbling along because they > are > > short on cash and their operations are > > substantially impaired > > -bankruptcy? reorg? > > -The locusts move on to the next victim > > > i feel your pain. Where you working for Madeoff > or this dude they have talking about this week, I > mean stanford? Ummm ??? very puzzled. But to answer your question: No