PIK toggle

A contractual election to pay interest in cash or in kind under specified terms. Choosing paid in kind (PIK) preserves current liquidity but increases the claim; the election alone does not establish inability to pay or financial distress.

PIK toggle in round numbers

Hypothetical US$ millions: a debt balance of 100 elects PIK for one full year at a 10% annual PIK rate. With annual capitalization and no other principal movements, interest of 10 is added and closing debt is 110. The alternative cash-pay rate may differ under the agreement.

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