easy · Private Credit underwriting-credit-analysis
How does the use of PIK interest typically affect a company's Loan-to-Value (LTV) ratio over time if the enterprise value remains stagnant?
- The LTV ratio remains unchanged because interest is an income statement item.
- The LTV ratio decreases as the company's equity value grows automatically.
- The LTV ratio increases as the loan balance grows.
- The LTV ratio is only affected by the cash portion of the interest payment.
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