Caveat bondholder

Normally, investors face a trade-off between risk and return. Private equity firms, however, have found a way to have their cake and eat it: dividend deals, under which they pay themselves dividends by leveraging up already highly indebted companies. These allow LBO sponsors to reduce their exposure and jack up their internal rates of return. No wonder «dividend recaps» have become extremely popular, at a time when markets have been awash with liquidity. There is, of course, rarely such a thing...