Private equity firms turn to debt-funded payouts as exit bottleneck drags on

Private equity firms are increasingly borrowing against portfolio companies to pay themselves as traditional exits remain difficult. More than USD 3.5 bn of leveraged loans and junk bonds have been launched over the past four weeks to fund sponsor dividends, accounting for roughly half of all dividend recapitalization activity this year, Bloomberg reports.

The resurgence of dividend recaps reflects a broader challenge facing the industry: According to Bain’s latest Global Private Equity Report (pdf), a growing number of portfolio companies are now “essentially trapped” as higher interest rates and stubborn valuation gaps make it harder for buyout firms to sell assets at acceptable prices. Many firms are also holding investments well beyond the traditional three-to-five-year timeline.

This is creating pressure to return money to limited partners some other way: Managers are facing a growing backlog of aging assets, while limited partners are placing greater scrutiny on firms’ ability to generate distributions, Bain says.

The exit market is showing signs of recovery, but not enough to clear the bottleneck: Global buyout-backed exit value jumped 47% y-o-y to USD 717 bn in 2025, making it the second-best year on record, according to Bain. Yet the number of exits fell 2% to 1.6k transactions, suggesting the rebound was driven largely by a handful of blockbuster transactions rather than a broad recovery across the market.

As a result, firms are increasingly turning to alternative liquidity tools: Bain says returning capital to investors is now the top reason sponsors launch continuation vehicles, while secondary sales and dividend recapitalizations are also becoming more common.

Those alternatives remain relatively small: Continuation vehicles still account for less than 10% of global exit value, according to Bain. But their growing use underscores a reality facing much of the industry — selling assets remains harder than buying them.

MARKETS THIS MORNING-

Asia-Pacific markets are trading up this morning, led by South Korea’s Kospi and Japan’s Nikkei. Over on Wall Street, equities are set to open lower with US futures down this morning, as news of US President Donald Trump’s threats of renewed attacks against Iran makes the rounds.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.4% yesterday on turnover of SAR 2.8 bn. The index is up 5.6% YTD.

In the green: Saudi Fisheries (+10.0%), Tamkeen (+4.0%), and Maadaniyah (+3.8%).

In the red: Liva Ins. (-5.3%), Jarir Marketing (-3.8%), and Budget Saudi (-3.3%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.1% yesterday on turnover of SAR 14.5 mn. The index is down 0.4% YTD.

In the green: Molan Steel (+9.5%), Digital Research Co. (+8.5%), and Jamjoom Fashion (+6.5%).

In the red: Rimath (-6.6%), Al Modawat (-6.5%), and Al Ashghal Al Moysra (-4.5%).

CORPORATE ACTIONS-

Cenomi Center’s board proposed an 8.98% capital boost to SAR 5.18 bn, according to a Tadawul disclosure. The SAR 426.6 mn capital increase comprises two components — 39.6 mn bonus shares issued to existing shareholders at a ratio of one share for every 12 held, and 3.1 mn new shares allocated to an employee share ownership program it will establish with the move.