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PIK (Payment-in-kind) securities

Highly bonds or preferred stock that pay interest or dividends through additional bonds or preferred stock.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Payment In-Kind

1. Describing a bond or preferred stock in which coupon payments or dividends come in the form of more bonds or shares, rather than cash. At times, the investor has the option of choosing whether to accept cash or payment-in-kind, but, more often, this option resides with the issuer. A problem with PIK securities for the issuer is the fact that it becomes tempting to pay bond coupons with more debt rather than cash when the company has a liquidity problem. Of course, doing this often adds to the issuer's liquidity problems. Likewise, payment-in-kind securities can hurt investors as they must pay taxes on the market value of these securities and may lack the cash to do so. Payment-in-kind bonds were not unusual during the private equity boom in the mid-2000s, but became rare during the credit crunch at the end of the decade.

2. The act of compensating the seller of a good or service with another good or service rather than money. See also: Barter.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Also, the data we use for our calculations from this wildest of all continents is by nature not perfect,' said PIK coauthor Johannes Feldmann.
The senior PIK toggle notes are notched down twice from Midco1's IDR, reflecting Fitch's view of the likely recoveries in the event of Midco1 defaulting.
On the escrow release date, the notes will be jointly, severally, fully and unconditionally guaranteed on a senior secured basis by each of the company's restricted subsidiaries (subject to certain exceptions) and the first lien notes will be secured on a first-priority basis and the second lien PIK notes on a second-priority basis, by most of its assets (subject to certain exceptions).
Taking advantage of the flexibility provided by the Lawo equipment--in terms of customising the functionality of the console and the use of sapphire and crystal modules in zirkon frames--LP Systems minimised the cost to the customer, while enabling Radio PIK to control the remote studio externally using RAVENNA.
Water Pik has more than 50,000 distribution points, according to MidOcean.
PIK net debt stood at $1.2b at end-2012, so SPO proceeds could send the debt level downwards to $1.1b.
Dit is die tyd van die Soweto-onluste in 1976 en Pik Botha bevind hom in die publieke oog en die internasionale spervuur.
Water Pik has been active on both the new-product and online front in reaching out to children.
Dometic, a white goods company, is planning to issue EUR200m of payment-in-kind (PIK) notes, according to the bank leading the deal.
Last year's losses included pounds 30.2m interest on their pounds 220m payment in kind (PIK) loans which have since been paid off.