Today's WSJ, has an article that discusses a bond known as the PIK-toggle. The article explains that the PIK-toggle (payment-in-kind) is allowing companies that issued these bonds to turn off the cash interest payment and replace it with more debt.
This means that $100 of interest income you expected to get will come in the form of $100 of additional bonds. Or in personal terms, its like having a $1000 credit card bill but instead of paying that $100 bill you just send your envelope back to the card company with a note that says "I'm short on cash this month IOU sometime in the future." Private Equity firms inserted the PIK-toggle provision in lending agreements to preserve cash in times of credit crises such as the one we find ourselves in today. The use of the PIK speaks to the severity of the cash crisis since compounded interest will cost these firms more in the long run.
I'm sure that Barney Frank already has drafted a bill to outlaw the PIK as well as force PE firm CEO's to wear chicken suits as just compensation for being smarter than everyone else. In all seriousness though, I expect Congress to weigh-in based on its incessant need to legislate that which it does not understand.
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