Private-equity firms from Bain Capital to Onex Corp. are raising loans through companies they own to pay themselves dividends at a pace that exceeds even the frothy days leading to the worst financial crisis since the Great Depression.

Borrowers controlled by buyout firms are on pace to raise more than $11.5 billion this month through dividend deals, a record and up from $3.6 billion in April, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data. Beats Electronics LLC, the headphone maker founded by rapper Dr. Dre and Geffen A&M Chairman Jimmy Iovine, is meeting lenders tomorrow to seek $700 million in such loans, according to people familiar with the situation who declined to be identified.

An increasing number of borrowers are taking advantage of investor demand for relatively high yields as the Federal Reserve keeps benchmark interest rates at about zero for a fifth year. Rather than refinancing debt at lower interest rates or funding expansion, dividend loans do little more than add leverage.

“Raising debt and leverage to fund a dividend weakens a company’s credit profile,” Lenny Ajzenman, an analyst at Moody’s Investors Service in New York, said in a telephone interview. “Using the proceeds for acquisitions or capital expenditures is less clear cut as far as its effect on the issuer’s credit profile.”

Loan Prices

Leverage, or debt to earnings before interest, taxes, depreciation or amortization for U.S. speculative-grade borrowers tracked by S&P’s Capital IQ LCD, rose to 4.8 times this month, up from 4.1 in April and from a post-crisis low of 3.5 times in February 2009.

Loan prices climbed to 98.88 cents on the dollar on May 9, the most since July 2007, according to the S&P/LSTA U.S. Leveraged Loan 100 Index. The debt has returned 3.2 percent this year, after gaining 10.5 percent in 2012.

About $33 billion of loans have been raised this year to support payouts according to S&P Capital IQ LCD. Dividend volumes in the U.S. speculative-grade market is “on pace for a record year,” Morgan Stanley analysts wrote in a May 17 report.

Pitching Clients

Such financings are on the rise as the pace of leveraged buyouts slows. The amount of capital controlled by private equity firms that has yet to be invested increased to about $366 billion in May, according to data from Preqin Ltd. At the same time, loans supporting buyouts plunged to the lowest level since August 2012, S&P’s Capital IQ LCD data show.