medium · Debt Capital Markets bond-instruments-structures
Why might a private equity sponsor prefer to include PIK-toggle debt in an LBO capital structure during the first 24 months post-acquisition?
- To lower the total leverage of the company immediately
- To eliminate the need for any equity contribution from the sponsor
- To maximize cash flow available for reinvestment or to handle integration costs
- Because PIK debt is always cheaper than senior secured bank loans
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