easy · Private Credit & Debt loan-structures-instruments
What is the 'compounding frequency' of a PIK loan, and why does it matter?
- It is the speed at which the lender can sell the loan in the secondary market.
- It is the timing (e.g., quarterly) at which interest is added to the principal; more frequent compounding results in a higher total debt balance.
- It refers to how many different lenders are part of the loan syndicate.
- It is the number of times a borrower is allowed to skip a cash payment before defaulting.
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