Thompson Coburn partner Jennifer Post and associate Steve Schwartz co-authored an article for ABL Advisor covering how ABL lenders can use Payment-in-Kind (PIK) interest, as well as protections they should consider if they turn to PIK in connection with challenged borrowers.
In the article titled “ABL Lending and PIK Interest: When and How to Use PIK Wisely,” Jennifer and Steve noted that PIK interest has become increasingly common across private credit markets, as borrowers seek liquidity and lenders compete for deal flow. PIK interest features allow borrowers to accrue interest to the loan principal instead of making cash interest payments.
“As more borrowers ask for (or require) PIK features to provide additional cash flow for their businesses, in a competitive market, ABL lenders should at a minimum understand PIK features and, where appropriate, consider using them in their loan products,” they wrote.
Read the full article here.
