hard · Private Equity accounting-flow
A sponsor uses a 'PIK Toggle' note to manage a portfolio company during a recession.
If the toggle allows the sponsor to switch from 10% cash-pay to 12% PIK, what is the primary 'cost' of exercising this toggle for two years on a $100M balance?
- $12.00M in annual interest.
- $4.00M in additional interest expense.
- $20.00M in cash outflow at exit.
- $25.44M in increased debt principal.
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