# Dividend Recap

*Corporate Finance & M&A — Finicade finance glossary*

A dividend recap has a portfolio company borrow money to pay its owners a dividend, letting a sponsor take cash out without selling. It's a legitimate way to de-risk a holding and a reliable indicator of a hot credit market. The company gains no asset and carries all the new debt, which is why dividend recaps cluster shortly before default cycles.

**Also known as:** dividend recapitalisation, debt-funded dividend

**Related terms:** [Recapitalization](https://finicade.com/glossary/recapitalization), [Leveraged Buyout (LBO)](https://finicade.com/glossary/lbo), [Private Equity](https://finicade.com/glossary/private-equity), [Sponsor](https://finicade.com/glossary/sponsor), [Leverage](https://finicade.com/glossary/leverage)

Source: https://finicade.com/glossary/dividend-recap