PE Portfolio Companies
Debt financing for PE portfolio companies
Private equity firms use debt to fuel add-ons, fund growth, return capital to LPs, and bridge to exit. The right lender depends on the use case — here's how to match each scenario to the right capital.
Add-on acquisition financing
The most common PE portco debt use case. The platform company acquires a smaller competitor or complementary business. Lenders underwrite the combined entity's pro-forma EBITDA. Key: have the quality-of-earnings report ready — lenders price off it.
Dividend recapitalization
The portco takes on new debt to pay a dividend to the PE sponsor. Lenders evaluate whether the business can service the new debt load. Dividend recaps are scrutinized more heavily than growth capital — the lender knows the cash is leaving the business.
Growth capital / expansion
Debt to fund organic growth: new hires, market expansion, product development. Lenders look at revenue trajectory and unit economics. SaaS and recurring-revenue businesses are favored here — predictable cash flows make underwriting straightforward.
Refinancing maturing debt
The most time-sensitive use case. When the existing facility matures, the portco must refinance. Starting early (6–12 months before maturity) gives you negotiating leverage. Waiting until the last 90 days puts the lender in control.
Bridge to exit
Short-term debt to fund operations while the PE sponsor prepares the company for sale. Lenders underwrite based on the expected exit valuation. These deals are smaller and faster — the lender knows their capital is short-duration.
Lender coverage for PE portcos
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