The IPO drought is driving private equity-owned companies to the debt market to pay investors

Private equity funds are increasingly pushing their portfolio companies to take on more debt to return cash to their investors, data suggests. It comes as the typical ways of monetizing private equity investments — selling company stakes via IPOs, or offloading them to other PE funds or buyers — have dried up in recent years. While investors get paid, the practice of private equity sponsors adding more debt to companies — known as dividend recapitalizations — risks weakening their ability to invest or weather future downturns in trading.