Jefferies

Actionable Ideas for Companies and Sponsors

HoldCo Bond Issuance to Fund Dividend Recaps

Holding Company (“HoldCo”) issuance to fund dividends is highly infrequent, as only 6 have been completed in the last two years. However, the strength of the high yield market is allowing issuers today to tap the often-closed HoldCo note market. Issuing notes at the HoldCo level allows companies to avoid the debt incurrence restrictions of their existing capital structure. This structure is particularly useful when these notes have the option to be paid in-kind, with additional notes, as the cash flow generating OpCo will often not have enough restricted payment capacity to service the HoldCo notes with cash.