medium · Debt Capital Markets bond-instruments-structures
Which of the following scenarios would most likely trigger a 'mandatory' PIK toggle in a junior debt instrument?
- The borrower's liquidity falls below a pre-defined threshold in a 'pay-if-you-can' structure
- The borrower completes a successful equity IPO that floods the balance sheet with new cash
- Market interest rates fall well below the note's cash coupon, prompting a refinancing instead
- The issuer's senior unsecured rating is upgraded to investment grade, opening access to cheaper funding
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