The Relentless Rise of PIK Shows Trouble to Come: Credit Weekly

A three letter acronym is increasingly cropping up in corporate filings and it’s fueling concern among ratings companies and fund managers.

Mentions of PIK in company filings, presentations and transcripts have doubled since the start of the pandemic, according to data compiled by Bloomberg. Short for ‘payment in kind,’ the term refers to debt that allows companies the option of deferring interest payments.

PIK obligations often amount to hidden leverage for companies, as delayed interest gets tacked on to principal due. The debt has proven particularly attractive to private equity firms, who have been hit by lower valuations ...