easy · Private Credit & Debt loan-structures-instruments
What is the fundamental definition of Payment-in-Kind (PIK) interest in a private credit transaction?
- Interest that is paid using the company's common equity shares at every period.
- A one-time fee paid at the closing of the deal to increase the lender's effective yield.
- Interest that is added to the principal balance of the loan rather than being paid in cash.
- A penalty fee charged to the borrower for failing to meet a financial maintenance covenant.
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