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• Recapitalization
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Dividend recapitalization
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A 'dividend recapitalization' (often referred
to as a 'dividend recap') in finance is a
type of leveraged recapitalization in which
a payment is made to shareholders. As
opposed to a typical dividend which is paid
regularly from the company's earnings, a
dividend recapitalization occurs when a
company raises debt —e.g. by issuing
Bond (finance)|bonds to fund the dividend.
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Dividend recapitalization
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Therefore, the additional debt burden of a
leveraged recapitalization makes a firm
more vulnerable to unexpected business
problems including recessions and
financial crises.
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Dividend recapitalization
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Typically a dividend recapitalization will be
pursued when the equity (finance)|equity
investors are seeking to realize value from
a private company but do not want to sell
their interest in the business.
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Leveraged recapitalization
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These types of recapitalization can be
minor adjustments to the capital
structure of the company, or can be
large changes involving a change in
the power structure as well.
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Leveraged recapitalization
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Leveraged recapitalizations are used by
privately held companies as a means of
refinancing, generally to provide cash to
the shareholders while not requiring a
total sale of the company. Debt (in the
form of bonds) has some advantages
over equity as a way of raising money,
since it can have tax shield|tax benefits
and can enforce a cash discipline. The
reduction in equity also makes the firm
less vulnerable to a hostile takeover.
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Leveraged recapitalization
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Therefore, the additional debt burden
of a leveraged recapitalization makes
a firm more vulnerable to unexpected
business problems including
recessions and financial crises.
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Emergency Economic Stabilization Act of 2008 - Bank recapitalization
Roubini has advocated bank
recapitalization (by providing cash in
exchange for preferred shares) and
suspending all dividend
payments.[http://web.archive.org/web/200
81012063512/http://www.forbes.com/opini
ons/2008/10/08/recession-depressionkeynes-oped-cx_nr_1009roubini.html Our
Choice
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Canadian National Railway - Deregulation and recapitalization
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Following its 1978 recapitalization and
changes in management, CN (name
changed to 'Canadian National
Railway', using the shortened acronym
'CN' in 1960) started to operate much
more efficiently, by assuming its own
debt, improving accounting practices
to allow depreciation of assets and to
access financial markets for further
capital
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Recapitalization
'Recapitalization' is a sort of a
corporate reorganization involving
substantial change in a company's
capital structure. Recapitalization
may be motivated by a number of
reasons. Usually, the large part of
equity is replaced with debt or vice
versa. In more complicated
transactions, mezzanine financing
and other hybrid securities are
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Recapitalization - Leveraged Recapitalization
One example of recapitalization is a
leveraged recapitalization, wherein the
company issues Bond (finance)|bonds to
raise money, and then buys back its own
shares. Usually, current shareholders
retain control. The reasons for this sort of
recapitalization include:
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Recapitalization - Leveraged Buyout
Another example is a leveraged
buyout, essentially a leveraged
recapitalization initiated by an outside
party. Usually, incumbent
equityholders cede control. The
reasons for this transaction may
include:
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Greek financial crisis - Details about the sale of bank recapitalization shares
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The fourth systemic bank (Eurobank
Ergasias|Eurobank), which failed to
attract private investor participation in
the first recapitalization program, and
thus became almost entirely financed
and owned by HFSF, also succeeded in
the second round to introduce private
investors; although this was only
achieved by HFSF accepting in the
process to dilute their amount of
shares from 95.2% to 34.7%.
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Greek financial crisis - Details about the sale of bank recapitalization shares
This estimated recovery of €31.3bn
comprise: A €0.6bn positive cash balance
stemming from its previous selling of
warrants (selling of recapitalization
shares) and liquidation of assets, €2.8bn
estimated to be recovered from
liquidation of assets held by its bad asset
bank, €10.9bn of EFSF bonds still held as
capital reserve, and €17bn from its future
sale of recapitalization shares in the four
systemic banks
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Southern Pacific Petroleum - Recapitalization
In September 2007, the proposal of
recapitalization of the company by
Ascent Capital was accepted and on 28
May 2008, shareholders approved the
recapitalization. At the same time all
interests held by third parties in the
Glassford Tenement, Central
Queensland, were transferred to SPP
and the company focued on exploration
and development of mineral resources.
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