Part of her legislative agenda continues to hold the private equity industry accountable “for what happens to its target companies,” she said in a statement late last month, when asked about the deal with Apria.
Apria’s recap of the dividends was by no means the largest in 2020. Epicor Software, a company supported by the investment group KKR, completed a $ 1.9 billion deal, and Radiate Holdco, a company owned by from TPG Capital, did a $ 2.6 billion business, according to S&P Global Market Intelligence.
And not all loans were necessarily for dividends. Loans can also be used to restructure debt, and portfolio companies rarely disclose how much of the borrowed money has been repaid. S&P estimates, however, that 45% of a dividend recap in the past five years was to pay a private equity owner.
In a recent regulatory document, Apria, a major supplier of oxygen and breathing apparatus for people living at home, said it was financially sound and generated about $ 1 billion in revenue and $ 41 million in net revenue in 2020. The company – which also paid a $ 175 million dividend in 2019 with most of the money borrowed – said it had a “relatively free balance sheet with low levels of debt”. Apria said he had no immediate plans to pay dividends to shareholders after his IPO
Apria and Blackstone, which will continue to be the majority owner of Apria, declined to comment.
Jim Baker, executive director of the Private Equity Stakeholder Project, said the main concern with using borrowed money to pay dividends is that it could undermine a company’s ability to borrow money for purposes that could help it grow.
“Debt-financed dividends do not help private equity firms at all and just put those companies at greater risk,” said Baker, whose advocacy group is supported by unions and other nonprofits.
A report published in October by the Baker group, which focused on dividends paid by private equity-controlled healthcare companies, concluded that several had filed for bankruptcy or were struggling as a result. Trident USA, a provider of mobile diagnostic equipment for nursing homes and care centers, filed for bankruptcy in 2019 after accumulating debts to pay $ 380 million in dividends to several privately held companies, including Audax Group and Frazier Healthcare Partners, several years before.