medium · Private Credit loan-structures-instruments
A business has $200,000,000 in Unitranche debt. $20,000,000 of the interest is PIK-based.
If the borrower is in a 'Non-Accrual' status, how is this debt handled for leverage multiples in a fund's portfolio report?
- The multiple is simply not reported because the borrower is currently in default.
- The PIK component already capitalized onto principal is fully excluded from the leverage numerator.
- The multiple is instead calculated using the fair value of the impaired debt, not its par balance.
- The multiple is calculated using the full principal plus any previously capitalized PIK.
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