HomeLatest ThreadsGreatest ThreadsForums & GroupsMy SubscriptionsMy Posts
DU Home » Latest Threads » Forums & Groups » Topics » Economy & Education » Economy (Group) » Twinkie leverage, a tale ...

Wed Jul 22, 2015, 03:54 PM

Twinkie leverage, a tale of contemporary capitalism

(Bloomberg) After dismissing a sale and initial public offering, Hostess Brands LLC still wants to reward its private-equity owners. It’s opting to pay them by levering up instead.

Two years after Apollo Global Management LLC and Metropoulos & Co. acquired the maker of Twinkies from liquidation, Hostess is selling $1.23 billion of term loans. Of that, $905 million will be used to pay a dividend to its shareholders, according to Standard & Poor’s. That’s more than double what they paid for the business.

The deal is just the latest example of how record-low borrowing costs from the Federal Reserve are encouraging risky companies to add cheap debt -- sometimes to enrich private-equity firms -- as investors clamor for yield.

So-called dividend deals reached almost $16 billion in the second quarter, the most in a year, according to Bloomberg data. The downside of the loans is they can increase a borrower’s risk of default by piling on debt, without any of the cash going to improving operations or boosting revenues.

“Dividends aren’t designed to create value for the company,” Moody’s Investors Service analyst Brian Weddington said by phone. “This is a return of capital and profits to the founding investors.” ...............(more)


2 replies, 756 views

Reply to this thread

Back to top Alert abuse

Always highlight: 10 newest replies | Replies posted after I mark a forum
Replies to this discussion thread
Arrow 2 replies Author Time Post
Reply Twinkie leverage, a tale of contemporary capitalism (Original post)
marmar Jul 2015 OP
Demeter Jul 2015 #1
MisterP Jul 2015 #2

Response to marmar (Original post)

Wed Jul 22, 2015, 04:02 PM

1. Daughter's class made "Minions" out of Twinkies


Company should get a clue and do a marketing tie-in.

Reply to this post

Back to top Alert abuse Link here Permalink

Response to Demeter (Reply #1)

Thu Jul 23, 2015, 12:04 AM

2. better than The Simpsons ...

Reply to this post

Back to top Alert abuse Link here Permalink

Reply to this thread