(Bloomberg) -- Private equity firms are using some of their companies as automated teller machines again. 

The firms are piling more debt onto companies they own to fund payouts to themselves, in a telltale sign that investors are increasingly willing to take risk. So far this year in the US, there have been eight leveraged loan sales whose proceeds in part went to companies’ owners, mainly private equity firms, according to data compiled by Bloomberg.

That compares with two for the entire fourth quarter of 2022. In Europe, companies have raised $2 billion in dividend recapitalizations, accounting for 12% of all leveraged loans sold this year, compared with just 4% for all 2022.

Investors are willing to buy this debt in part because there have been so few loans sold in recent months, as new acquisition activity has been depressed. The economy also seems stronger than money managers expected a few months ago, said Michael Chang, senior portfolio manager at Vanguard Group Inc. 

“That’s a backdrop that, in general, allows for incrementally more aggressive financing activity,” said Chang. “We have yet to see that play out in terms of leveraged buyout activity, but that usually takes a little bit longer.”

In February in the US market, five issuers have come forward with deals that include dividends for sponsors, including specialty chemicals company Nouryon Holding B.V. and insurance broker AmWINS Group, Inc. 

US leveraged loans have gained 3.3% this year, according to the Morningstar LSTA US Leveraged Loan total return index.

Junk Exceptionalism

Markets for much of the last year have been growing more concerned about rising interest expenses and pressure on earnings as central banks hike rates to tame inflation. Publicly traded companies are preparing for tough times ahead by taking steps including cutting dividends. So far this year, as many as 17 public companies in the Dow Jones US Total Stock Market Index have cut their payouts, and others may have to follow.

Read More: Dividends Crumble as Fed, Inflation Drive CEOs’ Cost-Saving Zeal

In contrast, some privately owned companies are opting to pay out one-time dividends to their owners. In the US and Europe, companies have done $5.8 billion worth of such deals in 2023. 

“Demand for these has been healthy where the business has a strong track record,” said Nicholas Clark, co-head of global leveraged finance at Allen & Overy LLP. 

In the US, the loan sale for AmWINS was increased to $850 million from $700 million this month, a sign of strong demand from investors. Eviosys, a French maker of food packaging and aluminum cans, also saw high demand for its €350 million loan ($371 million) prompting a boost to €400 million and the company shortened the deadline for investors to put in their orders. The money will go to a dividend for its private equity owner, KPS Capital Partners LP. 

Also this month, luxury clothing retailer Isabel Marant sold a bond with an 8% coupon with proceeds going to pay majority shareholder Montefiore Investment SAS and repay some of its existing notes. 

In Europe, British billionaire Jim Ratcliffe’s petrochemical firm Ineos Quattro started the process to raise €750 million ($796 million) of euro and dollar loans last week for a dividend. Ratcliffe is battling Qatari Sheikh Jassim Bin Hamad J.J. Al Thani to buy football club Manchester United FC.

“The stars have somewhat aligned,” said Jeremy Duffy, a partner at law firm White & Case, referring to such transactions.

--With assistance from Molly Price.

©2023 Bloomberg L.P.