Special paydays threaten equity investments

Private equity firms could be threatening the long-term credit quality of their investments by using cheap debt to boost one-off dividends payments. In a report last month by Standard & Poor's (S&P), credit analysts warn that the danger from "special paydays" appears real, although no loans connected with such deals have defaulted so far.

There has been a sharp rise in dividend recapitalisations over the past three years, with some $35 billion of refinancing linked to loans in 2005, compared