Which type of recapitalization involves issuing new debt to pay a special dividend?

The type of recapitalization that involves issuing new debt to pay a special dividend is best described as dividend recapitalization. In this process, a company takes on additional debt specifically to distribute cash to shareholders in the form of a special dividend. This strategy can be appealing for companies looking to provide returns to their investors while also managing their capital structure.

In dividend recapitalization, the company leverages its balance sheet, increasing its debt load with the intention of rewarding shareholders. This is different from equity recapitalization, which generally involves raising capital through issuing new equity instead of taking on additional debt. Debt recapitalization refers specifically to restructuring existing debt rather than using new debt for dividends, while asset recapitalization relates to restructuring based on asset valuation and doesn't directly pertain to dividend payments. Thus, choosing dividend recapitalization aligns accurately with the process of using newly issued debt to pay a special dividend.