PE Dividend Recap Calculator · Baratelli Institute

Dividend Recap — sized, stress-tested, IRR-attributed

A mid-hold dividend recapitalization pulls forward sponsor return by re-levering the portfolio company and distributing cash. This tool sizes the new debt stack to a target leverage, runs the use-of-proceeds waterfall, computes the pro-forma debt-service coverage, and attributes the IRR uplift versus a no-recap base case — then stress-tests the post-recap balance sheet against a 20% EBITDA decline.

Pro-forma stack

Senior + sub + total leverage

Cash to sponsor

After fees + refi premium

IRR uplift

vs no-recap base

Downside test

EBITDA −20% post-recap

Stage 1 · The deal at the recap date

Where the portco sits today — mid-hold, pre-recap. Use last-twelve-months EBITDA and the existing debt balance net of cash.

Current LTM EBITDA ($M)

QoE-adjusted, run-rate.

Existing debt outstanding ($M)

All term loans + mezz, net of cash on hand.

Original sponsor equity at entry ($M)

Year-0 equity check, before any prior distributions.

Years held to recap date

From close to recap effective date.

Effective tax rate (%)

Federal + state blended.

Stage 2 · Recap structure

Set the target post-recap leverage. The model sizes the new debt stack, runs the use-of-proceeds waterfall (refi + fees + premium + working-capital cash), and solves the residual dividend to sponsor.

Target post-recap total leverage (× EBITDA)

Senior + sub stack as multiple of LTM EBITDA. Most direct-lender packages cap at 6.0×.

of which senior leverage (× EBITDA)

Term loan B / senior secured. Balance is sub / mezz / HY notes.

Senior all-in rate (%)

SOFR + spread, all-in including LIBOR floor and OID amortization.

Sub / mezz blended rate (%, cash + PIK)

Cash coupon + PIK accretion combined.

Recap financing fees (% of new debt)

Arranger fees, ratings agency, legal, DFC. Industry std 1.0-2.0%.

Refi call premium on existing debt (%)

Non-call premium / soft call. 1.0% is typical in year 2-3 of a TLB.

Cash to balance sheet (working capital reserve, $M)

Minimum liquidity post-recap. Lenders generally require min cash covenant.

Stage 3 · Exit assumptions

The recap pulls forward equity return; the residual equity stake still exits at year 5 (or whenever). What does that look like?

Years from recap to exit

Typical: 2 years to a year-5 exit from a year-3 recap.

Exit-year EBITDA ($M)

LTM at exit. Should grow from current LTM via organic + add-ons.

Exit EV/EBITDA multiple (×)

Re-rate vs entry, comps-based.

Senior amortization (% of opening principal/yr)

Mandatory amort. TLB usually 1%/yr; cash sweep adds variable component.

Annual FCF sweep ($M/yr)

Excess cash flow swept to debt paydown. Typically 50-75% of FCF.

Stage 4 · Results

Pro-forma debt stack, dividend to sponsor, IRR uplift, coverage, and the downside test.

Headline numbers

Use-of-proceeds waterfall

Recap vs no-recap — side-by-side

Item	No recap	Recap path	Differential

Coverage & covenant snapshot

Downside test — EBITDA drops 20% the year after recap

The dividend recap is a fixed debt addition against a variable EBITDA. If the next year disappoints, the leverage and coverage ratios swing fast. This is the test that should be run before, not after, the recap closes.

Cross-sell — Practitioner's Guide to Private Equity

PE GUIDE COMPANION

This calculator is Model 04. The mechanics live in the guide.

Chapter 22.4 covers the recap decision framework — when it makes sense, when the lender market is open, and when the GP should leave the optionality on the table. Chapter 35 puts dividend recap inside the four-exit-channel decision: strategic, secondary, IPO, or recap-into-long-hold. The glossary defines the term against the broader recapitalization family. And Model 04 in the deal-type model suite is the Excel workbook this calculator runs against — same inputs, same waterfall, same balance-sheet logic, just on the page instead of in cells.

Open the PE Guide →