Definition of Leveraged recapitalization:
Usually, a leveraged recapitalization is used to prepare the company for a period of growth, since a capitalization structure that leverages debt is more beneficial to a company during growth periods. Leveraged recapitalizations are also popular during periods when interest rates are low since low interest rates can make borrowing money to pay off debt or equity more affordable for companies.
A leveraged recapitalization is a corporate finance transaction in which a company changes its capitalization structure by replacing the majority of its equity with a package of debt securities consisting of both senior bank debt and subordinated debt. A leveraged recapitalization is also referred to as leveraged recap. In other words, the company will borrow money in order to buy back shares that were previously issued, and reduce the amount of equity in its capital structure. Senior managers/employees may receive additional equity, in order to align their interests with the bondholders and shareholders.
Borrowing a large sum of money and distributing it among existing shareholders, so as to make a firm a less attractive hostile takeover target. See also poison pill.
Meaning of Leveraged recapitalization & Leveraged recapitalization Definition