PIK

Boring_Rub_5846

The entire BDC sector is being held up by garbage bonds and PIK toggle finance. It is in trouble. Luxury retail, consumer discretionary to follow. your backward looking numbers have nothing to offer.

Neat-Edge-3708

This is what Claude has to say This thesis is remarkably well-researched. Here’s a point-by-point breakdown of what checks out, what’s somewhat overstated, and what’s missing nuance: **What’s accurate or well-supported:** **Market size & growth** — the document claims $500B in 2020 growing to $2T+ in 2026. The U.S. private credit market expanded from $500B to roughly $1.3 trillion over the last five years [Think Realty](https://thinkrealty.com/article/rise-of-private-credit/), though Morgan Stanley puts global private credit at $3 trillion at the start of 2025 [Cayman Compass](https://www.caymancompass.com/2026/03/27/private-credit-and-risks-in-the-shadows/). The $2T+ figure is plausible depending on how you define the market; the FSB puts it at $1.5–2T. The core growth story is real. **Level 3 / mark-to-model valuation** — unlike publicly traded securities, these assets are typically marked using net asset value based on internal models or manager estimates rather than observable market prices, creating a disconnect between stated valuations and realizable prices under stressed conditions [Fair Observer](https://www.fairobserver.com/economics/private-credit-in-2026-between-silent-expansion-and-hidden-fragility/). Confirmed. **PIK usage doubling** — 11% of Q4 borrowers paid interest in-kind, with more than 58% of those featuring “bad PIK,” meaning borrowers opted to delay payments during the life of the loan rather than at origination [Bloomberg](https://www.bloomberg.com/news/articles/2026-02-11/-bad-pik-is-climbing-again-as-private-lenders-scrutinize-books). The doubling claim is broadly corroborated. **Synthetic PIK is real and used exactly as described** — lenders are using synthetic PIK options to offer PIK terms to a borrower without breaching any cap imposed on the amount of PIK debt permitted, as technically the interest on the unitranche debt is being paid in cash [Proskauer Rose LLP](https://www.proskauer.com/alert/private-credit-explained-delayed-draw-term-loans). Direct lenders including Blue Owl Capital have pitched deals that include synthetic PIK, a feature that lets companies make interest payments with additional borrowing without having to count the debt as being serviced “in kind.” [Bloomberg](https://www.bloomberg.com/news/articles/2024-05-30/private-credit-s-new-way-to-keep-payment-in-kind-under-the-radar) This is one of the more alarming and accurate points in the doc. **PIK predicts deterioration, not recovery** — academic research using BDC loan data shows PIK is primarily used for forbearance, concentrated among distressed firms, and predicts persistent deterioration rather than recovery — driven by PIK exercised after origination rather than at origination [SSRN](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5341145). This validates the thesis’s concern. **Withdrawal freezes happening** — Blackstone’s flagship private credit fund was hit with $6.5 billion in redemption requests, forcing executives to inject $400M of their own capital; BlackRock limited redemptions after withdrawal requests nearly doubled its 5% quarterly cap; Morgan Stanley and Cliffwater have also been forced to prorate redemptions [FinancialContent](https://markets.financialcontent.com/stocks/article/marketminute-2026-3-16-the-shadow-banking-crack-up-private-credit-faces-its-moment-of-truth). This is confirmed and ongoing. **Liquidity mismatch** — the fundamental flaw being exposed is promising quarterly liquidity to retail investors while holding illiquid five-year loans [FinancialContent](https://markets.financialcontent.com/stocks/article/marketminute-2026-3-16-the-shadow-banking-crack-up-private-credit-faces-its-moment-of-truth). Widely confirmed by regulators and analysts. **Where the thesis overstates or lacks nuance:** **The 2008 comparison** — the document implies this is comparable in scale to the subprime crisis. While Collateralized Debt Obligations in 2008 were leveraged 10x, leverage in private credit funds is closer to 1.25–1.3x [Cayman Compass](https://www.caymancompass.com/2026/03/27/private-credit-and-risks-in-the-shadows/). The systemic bank exposure is also much lower this time — the Federal Reserve estimates large U.S. banks’ loan commitments to private credit were $95 billion at end-2024, of which only $56 billion was utilized — relatively modest [Cayman Compass](https://www.caymancompass.com/2026/03/27/private-credit-and-risks-in-the-shadows/). **Default rate of 5–6%** — Fitch reported private credit defaults surged to a record 9.2% by late 2025 [FinancialContent](https://markets.financialcontent.com/stocks/article/marketminute-2026-3-16-the-shadow-banking-crack-up-private-credit-faces-its-moment-of-truth) — actually higher than the document claims, though some of that is measurement-dependent. **“Retail will hold the bag”** — Goldman Sachs estimates more than 90% of private credit investment is in institutional structures with longer lock-ups than retail funds [Cayman Compass](https://www.caymancompass.com/2026/03/27/private-credit-and-risks-in-the-shadows/). Retail exposure exists and is growing, but the primary bagholders right now are pension funds and institutional investors, not retail directly. **The SEC conspiracy framing** — there’s no sourced evidence regulators are deliberately protecting big banks at retail’s expense. What’s documented is that regulatory gaps exist and are being addressed slowly, which is a legitimate criticism but different from malicious intent. **Bottom line:** The core thesis — that private credit is under serious stress, PIK and synthetic PIK are masking the true default picture, liquidity mismatches are real, and CLO packaging reduces transparency — is **substantially accurate and corroborated by the FSB, academic research, Bloomberg, and observable market events**. The dramatic framing and 2008 comparisons are somewhat overblown given lower leverage and limited direct bank exposure, but the underlying risks are genuine and being actively flagged by serious institutions. This isn’t a fringe conspiracy; it’s a real stress point in the financial system.

gollygreengiant

For those smarter than me, but also too lazy to ask Claude yourself: “**Bottom line:** The skeleton — rapid growth of an opaque, mark-to-model credit market, a real maturity wall hitting just as rates failed to fall, rising use of PIK/payment-deferral mechanics to mask stress, and now actual redemption gates at real funds — is happening and is well-documented as of June 2026. The weaker parts are the precise percentages (sourced but not independently verifiable here) and the motive-attribution. This reads like a well-researched thread that's accurate on the macro shape of the problem but pushes the "the insiders know and are covering it up" framing harder than the evidence in front of me supports.”

Unusual-Brick7344

PIK is a funny word in Danish. Thank you for your attention to this matter

AlternativePaint6

Here’s a detailed assessment of your points, based on the most recent and authoritative sources as of June 2026: # 1. Market Size & Growth ✅ **Accurate.** The private credit market has indeed exploded in size, with assets under management (AUM) exceeding **$2 trillion in 2026** and projections to approach **$4 trillion by 2030**. For comparison, the 2008 subprime mortgage market was around $2 trillion, so the scale is now comparable or larger. # 2. Shadow Banking & Level 3 Assets ✅ **Accurate.** Private credit is a core part of "shadow banking," and most private loans are classified as **Level 3 assets** under GAAP, meaning their valuation relies on internal models ("mark-to-model") rather than observable market prices ("mark-to-market"). This opacity and subjectivity in valuation are well-documented and a major concern for regulators and investors. # 3. Loan Maturities & SaaS Exposure ✅ **Mostly Accurate.** A **significant wave of private credit loans** (especially to SaaS companies) are maturing in **2027–2029**, with the bulk peaking in 2028–2029. Outstanding loans to SaaS firms reached **over $500 billion by end-2025**, representing \~19% of total direct loans, and many of these were issued during the low-rate era of 2021–2022. The "Maturity Wall" is a widely recognized risk, as borrowers may struggle to refinance at higher rates. # 4. The Maturity Wall ✅ **Accurate.** The term is widely used to describe the upcoming refinancing crunch. If rates remain high, many borrowers will be unable to refinance, leading to defaults or fire sales. # 5. Fed Policy Shift ✅ **Accurate.** The Fed has **paused rate cuts** and is now signaling a **possible rate hike by the end of 2026**, with the median fed funds rate projection rising to **3.8%** (from 3.4% earlier in the year). This makes refinancing even harder for borrowers. # 6. Negative Free Cash Flow Borrowers ✅ **Accurate.** The **IMF’s 2025 Financial Stability Report** found that **\~40% of private credit borrowers now have negative free cash flow**, up from **25% in 2021**. This is a red flag for sustainability. # 7. Reported vs. Real Default Rates ✅ **Accurate.** Reported default rates are **1.5–2%**, but the **"true" default rate** (including PIKs, deferrals, and restructurings) is estimated at **5–6%** and rising. Fitch Ratings reported a **6.0% default rate in April 2026**, the highest on record. # 8. Payment-in-Kind (PIK) Usage ✅ **Accurate.** PIK usage has **more than doubled**, with **6.4% of private credit loans now carrying "bad PIK"** (deferred interest) as of early 2026. PIKs allow borrowers to skip cash interest payments by adding to the principal, masking defaults. # 9. Synthetic PIKs & Delayed-Draw Term Loans (DDTLs) ✅ **Accurate.** To bypass PIK exposure limits, lenders use **synthetic PIKs**—a **delayed-draw term loan (DDTL)** that lets borrowers draw down to pay interest, technically maintaining cash payments while increasing debt. This is a creative (and risky) way to hide leverage and defer recognition of financial stress. # 10. Private Credit CLOs ✅ **Accurate.** Private credit loans are increasingly bundled into **Collateralized Loan Obligations (CLOs)**, sold to pension funds, insurers, and retail investors via BDCs or fund managers like Ares, Blackstone, and Blue Owl. The opacity of underlying assets and the use of synthetic PIKs/DDTLs make it hard to assess true risk. # 11. SEC Oversight ✅ **Mostly Accurate.** The **SEC is actively monitoring** the sector, coordinating with the Fed and Treasury, and has flagged valuation and liquidity risks. However, the focus is on systemic risk and transparency, not just protecting "big money." Retail investors are exposed through BDCs and semi-liquid funds. # 12. Liquidity Mismatch ✅ **Accurate.** Most private credit loans have **5–7 year maturities**, but CLO investors (including retail) can often request withdrawals **quarterly**. This mismatch forces asset managers to **freeze withdrawals** when liquidity dries up. # 13. Withdrawal Freezes Already Underway ✅ **Accurate.** **Stone Ridge** fulfilled only **11% of withdrawals** in early 2026, **Blackstone** capped withdrawals and injected $400M of its own capital, and **Blue Owl froze withdrawals indefinitely** in some funds. This is already happening, not just a future risk. # TL;DR: The Big Picture Your summary is **largely accurate and well-supported by current data**. The private credit market is facing a **perfect storm**: * **Massive growth** ($2T+ AUM, $4T by 2030) with **opaque, mark-to-model valuations** (Level 3 assets). * **Maturity Wall** (2027–2029) with **$500B+ in SaaS loans** at risk, refinancing at higher rates. * **Rising defaults** (5–6% "true" rate, masked by PIKs and synthetic structures). * **Liquidity mismatch** (5–7 year loans vs. quarterly withdrawals) leading to **freezes at major funds**. * **Regulatory scrutiny** (SEC, Fed, Treasury) but **limited transparency** for retail investors. **The parallels to 2008 are real**: hidden leverage, opaque valuations, and a liquidity crunch—this time in private credit CLOs, with pension funds and retail holding the bag. **Would you like a deeper dive into any specific aspect, such as the role of AI in SaaS loan stress, the mechanics of synthetic PIKs, or the regulatory response?**

AlternativePaint6

Here’s a detailed assessment of your points, based on the most recent and authoritative sources as of June 2026: # 1. Market Size & Growth ✅ **Accurate.** The private credit market has indeed exploded in size, with assets under management (AUM) exceeding **$2 trillion in 2026** and projections to approach **$4 trillion by 2030**. For comparison, the 2008 subprime mortgage market was around $2 trillion, so the scale is now comparable or larger. # 2. Shadow Banking & Level 3 Assets ✅ **Accurate.** Private credit is a core part of "shadow banking," and most private loans are classified as **Level 3 assets** under GAAP, meaning their valuation relies on internal models ("mark-to-model") rather than observable market prices ("mark-to-market"). This opacity and subjectivity in valuation are well-documented and a major concern for regulators and investors. # 3. Loan Maturities & SaaS Exposure ✅ **Mostly Accurate.** A **significant wave of private credit loans** (especially to SaaS companies) are maturing in **2027–2029**, with the bulk peaking in 2028–2029. Outstanding loans to SaaS firms reached **over $500 billion by end-2025**, representing \~19% of total direct loans, and many of these were issued during the low-rate era of 2021–2022. The "Maturity Wall" is a widely recognized risk, as borrowers may struggle to refinance at higher rates. # 4. The Maturity Wall ✅ **Accurate.** The term is widely used to describe the upcoming refinancing crunch. If rates remain high, many borrowers will be unable to refinance, leading to defaults or fire sales. # 5. Fed Policy Shift ✅ **Accurate.** The Fed has **paused rate cuts** and is now signaling a **possible rate hike by the end of 2026**, with the median fed funds rate projection rising to **3.8%** (from 3.4% earlier in the year). This makes refinancing even harder for borrowers. # 6. Negative Free Cash Flow Borrowers ✅ **Accurate.** The **IMF’s 2025 Financial Stability Report** found that **\~40% of private credit borrowers now have negative free cash flow**, up from **25% in 2021**. This is a red flag for sustainability. # 7. Reported vs. Real Default Rates ✅ **Accurate.** Reported default rates are **1.5–2%**, but the **"true" default rate** (including PIKs, deferrals, and restructurings) is estimated at **5–6%** and rising. Fitch Ratings reported a **6.0% default rate in April 2026**, the highest on record. # 8. Payment-in-Kind (PIK) Usage ✅ **Accurate.** PIK usage has **more than doubled**, with **6.4% of private credit loans now carrying "bad PIK"** (deferred interest) as of early 2026. PIKs allow borrowers to skip cash interest payments by adding to the principal, masking defaults. # 9. Synthetic PIKs & Delayed-Draw Term Loans (DDTLs) ✅ **Accurate.** To bypass PIK exposure limits, lenders use **synthetic PIKs**—a **delayed-draw term loan (DDTL)** that lets borrowers draw down to pay interest, technically maintaining cash payments while increasing debt. This is a creative (and risky) way to hide leverage and defer recognition of financial stress. # 10. Private Credit CLOs ✅ **Accurate.** Private credit loans are increasingly bundled into **Collateralized Loan Obligations (CLOs)**, sold to pension funds, insurers, and retail investors via BDCs or fund managers like Ares, Blackstone, and Blue Owl. The opacity of underlying assets and the use of synthetic PIKs/DDTLs make it hard to assess true risk. # 11. SEC Oversight ✅ **Mostly Accurate.** The **SEC is actively monitoring** the sector, coordinating with the Fed and Treasury, and has flagged valuation and liquidity risks. However, the focus is on systemic risk and transparency, not just protecting "big money." Retail investors are exposed through BDCs and semi-liquid funds. # 12. Liquidity Mismatch ✅ **Accurate.** Most private credit loans have **5–7 year maturities**, but CLO investors (including retail) can often request withdrawals **quarterly**. This mismatch forces asset managers to **freeze withdrawals** when liquidity dries up. # 13. Withdrawal Freezes Already Underway ✅ **Accurate.** **Stone Ridge** fulfilled only **11% of withdrawals** in early 2026, **Blackstone** capped withdrawals and injected $400M of its own capital, and **Blue Owl froze withdrawals indefinitely** in some funds. This is already happening, not just a future risk. # TL;DR: The Big Picture Your summary is **largely accurate and well-supported by current data**. The private credit market is facing a **perfect storm**: * **Massive growth** ($2T+ AUM, $4T by 2030) with **opaque, mark-to-model valuations** (Level 3 assets). * **Maturity Wall** (2027–2029) with **$500B+ in SaaS loans** at risk, refinancing at higher rates. * **Rising defaults** (5–6% "true" rate, masked by PIKs and synthetic structures). * **Liquidity mismatch** (5–7 year loans vs. quarterly withdrawals) leading to **freezes at major funds**. * **Regulatory scrutiny** (SEC, Fed, Treasury) but **limited transparency** for retail investors. **The parallels to 2008 are real**: hidden leverage, opaque valuations, and a liquidity crunch—this time in private credit CLOs, with pension funds and retail holding the bag. **Would you like a deeper dive into any specific aspect, such as the role of AI in SaaS loan stress, the mechanics of synthetic PIKs, or the regulatory response?**

Aggravating_Ice_9884

Ok, Dr Doom. I followed your advice cause im a lazy bastard, this is Claudes response: Good question — this is worth unpacking carefully, because the document mixes well-documented facts with some exaggerated or imprecise claims. Here's a breakdown: **What checks out:** The core thesis is grounded in real, well-documented concerns being discussed by serious institutions like the IMF, FSB, and Federal Reserve. The U.S. private credit market grew from $500 billion to roughly $1.3 trillion over the last five years — though the document's claim of "$2+ trillion in 2026" is on the high end. Estimates of the global private credit market's size vary widely: the IMF puts it at just over $2 trillion as of April 2024, JPMorgan at $3.14 trillion, and Bloomberg noted $1.8 trillion in 2025 — so the "$2 trillion" figure is plausible for global totals, not U.S.-only. [Think Realty](https://thinkrealty.com/article/rise-of-private-credit/)[Wikipedia](https://en.wikipedia.org/wiki/Private_credit) The "shadow banking" label and "Level 3 / mark-to-model" valuation concern is accurate. Private credit firms rarely publish valuations, and the IMF has emphasized a need for greater government supervision and public transparency. [Wikipedia](https://en.wikipedia.org/wiki/Private_credit) The default rate discrepancy is real. The headline default rate in private credit has remained below 2% for several years, but once selective defaults and liability management exercises are included, the "true" default rate approaches 5%. One source puts private credit default rates hitting a record 9.2% in 2025, so the "5-6%" figure in the document may actually be conservative. [Withintelligence](https://www.withintelligence.com/insights/private-credit-outlook-2026/)[AICPA & CIMA](https://www.aicpa-cima.com/resources/article/private-credit-market-outlook-2026) The PIK usage doubling is confirmed. Payment-in-kind (PIK) arrangements have grown in popularity, more than doubling from 5% to 11% of the market by late 2025. [AICPA & CIMA](https://www.aicpa-cima.com/resources/article/private-credit-market-outlook-2026) "Synthetic PIKs" are real and documented. In some structures, borrowers draw down on a delayed draw term loan facility to cover interest payments — effectively incurring debt to meet the interest obligation. S&P Global explicitly notes that synthetic PIK is excluded from standard charts because it refers to situations where a borrower uses another form of debt to fund cash interest payments, with a similar economic effect of increasing leverage. [Debt Explorer](https://debtexplorer.whitecase.com/leveraged-finance-commentary/private-credit-leans-on-pik-flexibility-in-competitive-market)[Golubcapital](https://education.golubcapital.com/resource/the-bigger-pik-ture-bringing-clarity-to-payment-in-kind-structures-in-private-credit/) The withdrawal freezes at Blackstone and Blue Owl are confirmed. Blackstone raised its quarterly repurchase limit to 7.9% of total shares, with the firm and its employees stepping in to cover the remainder, enabling BCRED to meet 100% of requests. Blue Owl walked back its prior claim of resuming quarterly redemptions and instead effectively changed its fund into a drawdown vehicle. [Connect Money](https://www.connectmoney.com/stories/blackstone-upsizes-bcred-redemptions-to-meet-investor-withdrawal-wave/)[Morningstar](https://www.morningstar.com/bonds/blackstone-private-credit-aims-calm-investor-jitters) The maturity wall concern is real. The 2021–2022 vintages are considered the most problematic; struck in an era of inflated valuations, low base rates, and aggressive leverage, many of these companies failed to deliver the adjustments assumed at underwriting. With maturity walls building between 2025 and 2027, managers face growing pressure to resolve positions they can no longer defer. [Pinebridge](https://www.pinebridge.com/en/insights/investment-strategy-insights-public-credit-resilience-private-debt) **Where the document overstates or misleads:** A few things are framed more dramatically than the evidence supports: * **"$2+ trillion in 2026, expected to grow past $4 trillion by 2030"** — the $4 trillion figure appears inflated; mainstream projections like Moody's put it at roughly $2 trillion by 2027. * **"$500B in private debt maturing in 2028 alone"** — this specific figure isn't verified here and may be an approximation or exaggeration. * **"IMF estimates 40% of borrowers have negative free cash flow"** — this is a real IMF concern but the exact 40% figure isn't confirmed in current sources. It may be from an older IMF report. * **The 2008 comparison** is emotionally resonant but structurally imprecise. Private credit CLOs do resemble pre-2008 CDOs in opacity, but the ownership structure and regulatory context are different. * **"Retail will hold the bags / SEC only protecting big banks"** — this is editorial spin. The SEC is genuinely monitoring this, and in 2026, concerns about withdrawals rose after some private credit funds began placing restrictions on redemptions and hitting redemption caps, which is a real problem — but it's not a coordinated conspiracy. [Wikipedia](https://en.wikipedia.org/wiki/Private_credit) * **The Stone Ridge "11% of withdrawals fulfilled"** claim is not confirmed in current sources. Stone Ridge filings show normal repurchase mechanics, not a dramatic partial fulfillment. **Bottom line:** The document is roughly 70% accurate on the underlying facts, drawing on real institutional concerns that are actively discussed by the IMF, FSB, and Fitch. The risks it describes — PIK inflation hiding defaults, maturity walls, illiquidity mismatches in CLOs, pension fund exposure — are legitimate and serious. But it's written in a way that presents worst-case interpretations as established fact, omits nuance (e.g., that PIK isn't always a distress signal), and sometimes uses figures that can't be fully verified. It reads like something written for a finance-skeptic audience, probably on Reddit or a Substack — grounded in real concerns, but not a balanced analysis you'd want to make investment decisions from.

codefake

This is the kind of thing people call “alarmist” right up until the quarterly redemption gates come down and suddenly everyone discovers the assets were “marked to vibes.” The really ugly part isn’t just private credit getting huge. It’s the stack of incentives underneath it: opaque loans, internal valuations, PIK interest, synthetic PIK workarounds, CLO packaging, pension/insurance exposure, and maturity walls landing right when refinancing is expensive and a bunch of “growth” companies are getting kneecapped by AI. That is not a clean credit market. That is a junk drawer with a Bloomberg terminal. The 2008 comparison is not perfect, but the rhyme is obvious: complexity hides risk, ratings sanitize it, yield-hungry institutions buy it, and retail finds out last. The phrase “shadow banking” should probably bother people more than it does. The defense will be, “Private credit is different, these are sophisticated investors, banks are less exposed, underwriting is tighter.” Maybe. But when the pitch depends on assets nobody can price cleanly, borrowers paying interest with more debt, and funds promising liquidity on illiquid paper, you are not looking at financial innovation. You are looking at denial with a fee structure. So yeah: maybe not one giant 2008-style detonation. Maybe worse in a different way — a slow-motion credit embolism where everything is technically fine until the exits are locked. Dog shit wrapped in cat shit is crude, but honestly? Too generous. At least that’s organic.

Ok-Blood4340

OpenAI pays Microsoft. That’s why they have like $350B in backlog PIK. The guy who said Microsoft is paying OpenAI, is wrong.

King_Chron

*Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the Company’s ability to execute its go-forward strategy; risks related to additional financing;* ***risks relating to the Company’s debt obligations and the ability to make payments on existing indebtedness;*** *risks related to the ability to access private and public capital; stock market volatility; the availability of financing; changes in the business activities, focus and plans of the Company and the timing associated therewith;* ***the timing of any changes to federal laws in the U.S. to allow for the general cultivation, distribution, and possession of cannabis; regulatory and licensing risks;*** *changes in cannabis industry growth and trends; changes in general economic, business and political conditions, including changes in the financial markets; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation, including the Company’s interpretation of such regulation; public opinion and perception of the cannabis industry; and the risk factors described in the public filings of the Company filed with Canadian securities regulators and available under the Company’s profile at www.sedarplus.ca.* ***The enforcement of federal laws in the United States is a significant risk to the business of the Company and any proceedings brought against the Company thereunder may adversely affect operations and financial performance.*** **No Formal Warning**: Fluent Corp (formerly Cansortium) has **not** received a formal auditor's going concern warning in 2026. * **Recent Stability Measures**: * **Emergency Funding**: On **March 18, 2026**, the company secured a **$6 million** term loan at a **13.00% PIK interest rate** to strengthen its balance sheet and fund working capital. * **Asset Sale**: It completed a **$12.5 million sale** of its Pennsylvania operations on December 31, 2025, specifically to reduce debt. * **The Federal Reform Link**: The company frames its future viability around **federal rescheduling (Schedule III)**, which it expects will provide massive **280E tax relief** and improve banking access.  FLUENT Corp. +4

SkepticalInvestor21

You're connecting some important dots here. The private credit boom does have some structural similarities to pre-2008 CLO/CDO dynamics - opacity, leverage, and the "yield-chasing" behavior from insurance companies and pension funds starved of fixed income returns. The key differences worth noting: - Private credit is floating rate (largely), so rising rates hurt borrowers, not the instruments themselves - The investor base is mostly institutional, not retail-exposed through securitization chains - Most direct lenders do have real underwriting teams vs. the "originate to distribute" model that broke in 2008 That said, the stress points you're identifying are real: covenant-lite structures, "PIK" (payment in kind) where interest is just added to principal rather than paid, and valuations that haven't been marked to market during this rate cycle. The "shorting machine" angle is interesting - who exactly is building synthetic exposure to short private credit? That's a much harder instrument to construct than CDS on RMBS was. Do you have more detail on the specific mechanisms being used?

Perfect-Obligation60

Thats not new, and you'd only put it on the balance sheet when the lease commences and future minimum lease payments are disclosed in the footnotes only when they are added to the balance sheet. So yes, when control transfer the ROU and liability is put on eventually but the debt is being taken on now and the interest cost is being carried now, a lot of these loans are PIK too.

ReversalTheory

Software's getting wrecked but everyone's ignoring how software companies are the largest users of PIK debt. Private credit lenders have been giving away this shit like banks were handing out subprimes in 2000s lol. Private credit market has grown exponentially since covid. Over $20b pulled from private credit funds in the q1 this year. If this trend continues, it could lead to real systemic risk

AlarmedPelican

On April 8, Moody's shifted its outlook for the Business Development Company (BDC) sector to "negative." The agency cited mounting redemption pressures and the prevalence of PIK (Payment-in-Kind) interest, where interest is added to the principal, as major red flags for the sector's liquidity.

ReversalTheory

PIK

ReversalTheory

Is private credit a bigger risk than oil? We're seeing software still getting wrecked and software companies are the largest users of expensive PIK debt, which allows borrowers to skip cash interest payments on their debts until the loan matures, flattering lenders’ balance sheets and potentially masking distress until much later. BDC assets have quadrupled since 2020 and now we're starting to see the weakest earnings results for BDCs in years. The sharp drop in value is likely going to weigh on the $2 trillion private credit market and redemption pressure on unlisted funds is going to continue to rise. Could be setting up for a big liquidation event but prob not big enough for a market crash

thisonelife83

I think this will be a rich people problem and those who work in finance positions in private credit. Big banks weren’t allowed to loan money to dogshit companies after the great financial crisis. They had to have proper underwriting standards. Private credit popped up out of necessity to loan money to companies with unproven track records. When big banks said no, private credit stepped in with bags of cash to give away. Maybe a third of it flowed into SAAS companies. Now those companies are cutting staff and competing against LLMs (Claude, Grok, ChatGPT, Gemini, etc). The thought is these companies in the software space will fail or at least not pay back their loans timely. Cracks have already started showing apparently and payment in kind (PIK) have accelerated. Companies aren’t repaying loans but adding the interest to the principal balance and calling it good. They are kicking the can down the road but the road ahead looks rocky.

BonVoyPlay

Then you missed what's happening with PIK and default rates in the multi trillion dollar private credit market, if you think 2008 is an anomaly

Evening_Office_8778

Thanks for sharing—the chips are finally falling in place. To clarify the debt for those watching the balance sheet: that $625M original loan from Exxon snowballed into \~$922M as of the last 10-K. This is because it's PIK (Paid-In-Kind) - which is like how a zero coupon bond interest accrues. Basically, Sable hasn't been paying Exxon a dime in cash while the pipes were dry and was instead being "paid" by adding principal. Per the second amended agreement, $922 MN is now due on 3/31/27 OR 90 days after the first oil sale - which they just announced they were 'initiating'. Since they hit "First Sales" on March 29, 2026, - they have until late June 2026 to refinance this \~$950M (estimated total by June) with cheaper, traditional bank debt. Now that they're pumping 50k+ bpd, they finally have the cash flow to make that happen - especially with WTI at $100/barrel.

Relative-Snow8735

I can't recall which podcast I heard this on, but the guest made two points regarding private credit that resonated with me. First, he claimed that default/delinquency rates were lower than their higher rated public credit counterparts. The issue with that, is that with private credit presumably being the higher risk basket one would expect the opposite. So he seems to think maybe they are using PIK or other methods to delay/extend the loans and make the numbers look better. The second point he made, was that when you liquidate holdings to cover these redemptions, there is going to be a bias towards selling off the higher quality assets because you can get par value for those, whereas if you try and offload the lower quality assets, you may be forced to write those down and recognize losses. Overtime, that is going to leave the fund holding lower and lower quality loans. One could see a scenario where redemptions requests remain high while at the same time the economy starts trending downward causing more issues in the portfolio. With redemption limits set to 5% per quarter, it could be a few years before you can get your money out, and you won't really know how bad the underlying portfolio is until they are forced to start off loading the underperforming portion of the portfolio. No idea how accurate or likely the above scenario is. And it feels like the broader risk to private credit is the overall economic picture. If that deteriorates rapidly, then a lot of other stuff is going to go down to. So being down 25% on a BDC might be preferable to being down 60% on an AI stock. But I would definitely consider the risks. Also, if you are buying public BDC tickers you don't have the same redemption risk that a direct investor would, so it is not quite apples-to-apples.

_Doomer_Wojack_

Fair point on timing and normally I’d agree with you. The slow walk is how it usually plays out. Nobody wants to mark to reality and blow up their bonus. That’s how 2008 took two years to unfold from first cracks to collapse. But the difference this time is there’s a physical catalyst that doesn’t care about accounting. Hormuz is closed. 20% of global oil is not moving. Dubai crude is at $170. Countries are already rationing fuel. This isn’t a slow moving credit deterioration where banks can extend and pretend for years. Companies that need energy to operate are running out of it right now. You can’t PIK toggle your way out of not having fuel. In 2008 the rot took years because it was financial and you could hide losses with creative accounting. This is physical. Barrels either arrive or they don’t. Factories either have power or they don’t. The energy crisis compresses the timeline because the real economy breaks before the accountants can paper over it.

_Doomer_Wojack_

Fair point on timing and normally I’d agree with you. The slow walk is how it usually plays out. Nobody wants to mark to reality and blow up their bonus. That’s how 2008 took two years to unfold from first cracks to collapse. But the difference this time is there’s a physical catalyst that doesn’t care about accounting. Hormuz is closed. 20% of global oil is not moving. Dubai crude is at $170. Countries are already rationing fuel. This isn’t a slow moving credit deterioration where banks can extend and pretend for years. Companies that need energy to operate are running out of it right now. You can’t PIK toggle your way out of not having fuel. In 2008 the rot took years because it was financial and you could hide losses with creative accounting. This is physical. Barrels either arrive or they don’t. Factories either have power or they don’t. The energy crisis compresses the timeline because the real economy breaks before the accountants can paper over it.

Prussia_alt_hist

You are directionally right and sloppily wrong. The strong part of the thesis is this: post-2008 regulation pushed credit intermediation away from banks and toward nonbanks, private credit, insurers, and fund structures that are less transparent and less liquid under stress. Banks are still tied to that ecosystem through direct lending, commitments, financing lines, and counterparty links. Moody’s data cited by Reuters says U.S. banks had roughly $300 billion of loans to private-credit providers by June 2025, another $285 billion to private-equity funds, plus about $340 billion of unused commitments. The IMF has also warned that bank exposures to nonbanks in the U.S. and euro area can exceed banks’ Tier 1 capital, and reporting around the IMF’s 2025 stability work put U.S. and European bank exposure to hedge funds, private credit, and similar nonbanks around $4.5 trillion. That part is real.  The other strong part is borrower quality. The IMF’s 2025 stability work did flag that more than 40% of private-credit borrowers had negative cash flow by the end of 2024, up sharply from 2021. Fitch’s U.S. private-credit default rate was 5.8% in January 2026 and 5.4% in February, with payment-in-kind features involved in a large share of recent default events. So the sector is not clean, and PIK accounting is absolutely capable of masking stress for longer than public markets usually tolerate.  Your analogy breaks when you jump from “vulnerable credit complex” to “this is 2008 again.” It is not the same structure. In 2008 the core of the system itself—bank balance sheets, broker-dealer funding, subprime securitization, and AIG-style guarantees—was directly loaded with assets that were widely misrated, mark-to-market sensitive, and financed short. Today the problem is more likely to be a grinding credit impairment and liquidity mismatch across semi-liquid funds, insurers, PE-owned borrowers, and bank credit lines, not an overnight collapse of the entire payments system. That can still be ugly. It is just a different failure mode. Reuters reporting over the past two weeks reflects strain, redemption pressure, markdowns, and tighter bank lending to the sector, not a proven 2008-style systemic seizure yet.  Some of your specific numbers are inflated or unsupported. Blackstone’s fund is not an $82 billion vehicle hit by $6.5 billion of redemptions, based on the reporting I found. Reuters reported that Blackstone’s BCRED saw $3.7 billion of withdrawals in Q1 2026, on an $82 billion fund, and Blackstone raised the withdrawal cap to 7% while injecting capital to meet requests. That is pressure, not a run.  The insurance claim is also overstated. Recent reporting put U.S. life insurers’ private-credit exposure at about $482 billion at year-end 2025, around 8% of total life-insurance assets, not 20% of the entire U.S. insurance industry’s assets. There are legitimate concerns around private ratings and capital treatment, but your figure is not credible.  I could not verify your “BlackRock CLO breached its collateral triggers” claim from reliable primary reporting. I did find Reuters reporting that CLO managers are trying to reduce software exposure because they fear downgrades and defaults, but that is not the same as a documented trigger breach at a named BlackRock vehicle.  The Deutsche Bank point is partly right. Deutsche disclosed a private-credit portfolio of about €25.9 billion, roughly $30 billion, and UBS research cited in Bloomberg said Deutsche had the largest exposure among European lenders to nonbank financial institutions. But “30% of its loans to NBFIs versus 8% European average” did not show up in the Reuters source I could verify, so treat that ratio as unconfirmed unless you can point to the UBS note directly.  Your Citi “systemic amplification factor of 14.8x” looks especially weak. I could not verify it from a credible bank filing, regulator, or major news source. What I did find was that exact language circulating in reposts of the same social-media thesis. Until there is a source, treat it as contaminated data.  The oil section is where you overcooked it hardest. As of March 22, 2026, Reuters had Brent around $112, after an 8.8% weekly rise, and other reporting put it near $119 at peak moments. Some physical grades outside Hormuz, especially Omani crude, traded above $150, and Saudi scenarios discussed the possibility of $180 if disruption lasts beyond April. But “oil went to $170 physical” is not a clean benchmark statement, and presenting it as the market level is misleading. The correct version is: benchmark crude is a bit above $110, some physical barrels have traded dramatically higher, and prolonged disruption could push prices much higher still.  The macro conclusion is plausible but not proven. The IMF, ECB, and market reporting all say the Iran war is raising inflation risks and weakening growth, making rate cuts less likely and in some jurisdictions reviving hike risk. That is bad for weakly cash-generative borrowers. But “the Fed is trapped” is rhetoric, not analysis. Central banks are dealing with a stagflationary shock; they are not mechanically unable to move.  Net assessment: Your core insight is good: private credit is a real stress transmission channel, banks are still connected to it, insurers are more exposed than the old “safe boring money” story suggests, and an energy shock is exactly the kind of thing that exposes fake coverage, PIK dependence, and refinancing fragility.  Your bad habit is turning a good structure into a tradeable certainty by stuffing it with half-verified numbers and forcing a perfect 2008 analogy. That degrades the argument. The clean version is not “this is 2008 again.” The clean version is: this is a slower, more opaque credit stress cycle with real contagion channels, real valuation games, and real macro accelerants, but the evidence today supports vulnerability and repricing, not yet a proven systemic collapse.  So the verdict is: You are wrong if the claim is “same structure, same inevitability, same immediate outcome as 2008.” You are right if the claim is “private credit has recreated credit risk opacity through different intermediaries, and the Iran-driven energy shock materially raises the odds that this gets stress-tested hard in 2026.”

jhundu

Interesting read so I fact checked with Gemini Pro -Based on a thorough review of the Reddit post and cross-referencing it with current financial data and institutional research as of March 2026, here is an evaluation, fact-check, and independent analysis of the author’s thesis. # 1. Summary of the Post's Thesis The author argues that the $2–$3 trillion private credit market is essentially a recreation of the 2008 subprime mortgage crisis, just with different collateral and middlemen. The core thesis is that banks merely outsourced their risky lending to private credit funds, who then lent to overleveraged, unprofitable companies. Now, facing an energy shock (driven by the Iran conflict) and persistently high interest rates, these underlying companies are buckling. The author claims the crisis is being masked by accounting tricks and fund "gates," but that the systemic risk will ultimately blow back onto the major banks. # 2. Fact-Checking the Core Claims * **Claim: "40% of private credit borrowers have negative free cash flow."** * **Verdict: TRUE.** According to the IMF's latest Financial Stability Report, approximately 40% of private credit borrowers are currently operating with negative free cash flow. This is a severe deterioration from 25% in 2021. * **Claim: "Actual default rates are closer to 9% but Payment-in-Kind (PIK) accounting lets funds pretend borrowers are paying."** * **Verdict: TRUE.** While headline default rates look artificially low (often cited below 2-5%), rating agencies like Fitch have tracked "true" default rates—which include selective defaults, distressed exchanges, and liability management exercises—at closer to 9.2%. The explosion of PIK toggles (where struggling companies defer cash payments by simply adding the interest to their principal debt) is heavily masking underlying distress. PIK now accounts for roughly 8% to 10% of total investment income for major Business Development Companies (BDCs). * **Claim: "Blackstone's $82 billion flagship fund just got hit with $6.5 billion in redemption requests."** * **Verdict: TRUE.** In Q1 2026, Blackstone’s flagship private credit fund (BCRED) received redemption requests totaling 7.9% of the $82 billion fund, which equates to roughly $6.47 billion. Blackstone was forced to "upsize" its standard 5% withdrawal cap to 7% and inject $400 million of employee capital just to satisfy the requests. Similar liquidity gating has occurred recently at other major firms like Blue Owl Capital. * **Claim: Banks are heavily exposed because they lend to these shadow funds.** * **Verdict: TRUE.** The author correctly identifies that risk didn't leave the banking system; it took a detour. Banks provide massive leverage to these funds via "warehouse lines" and Net Asset Value (NAV) loans. Regulators have recently escalated warnings that the banking sector's exposure to Non-Bank Financial Institutions (NBFIs) is a critical systemic blind spot. # 3. My View Based on Research: Is it 2008 Again? The author's "Mark Baum moment" is highly justified by the underlying macroeconomic data, but **the mechanics of the fallout will look different than 2008.** It is less of an overnight banking implosion and more of a prolonged, slow-moving credit crunch. **Where the author is absolutely right (The Parallels):** * **The Illusion of Safety:** Just as subprime mortgages were packaged into AAA-rated CDOs in 2007, highly leveraged loans to unprofitable software and mid-market companies are being packaged into seemingly safe CLOs and sold to pension funds and insurance companies. * **Extend and Pretend:** The rampant use of PIK accounting is the 2026 equivalent of the "teaser rate" on a subprime mortgage. It delays the inevitable. If a company has negative free cash flow, paying interest with *more debt* is mathematically terminal, especially with the ongoing energy shock keeping inflation and rates elevated. * **Opacity:** Because these are private, bilateral loans, there is no public market pricing. Fund managers are effectively marking their own homework, delaying write-downs until they are forced to. **Where the author is slightly off (The Differences):** * **Leverage Levels:** In 2008, banks were leveraged 30-to-1 on toxic assets, creating instantaneous insolvency when asset values dipped. Private credit funds utilize significantly lower structural leverage (often 1-to-1 or 2-to-1). * **"Gates" Prevent Firesales:** 2008 was characterized by a "run on the bank"—depositors and counterparties demanding cash instantly, forcing banks to sell assets at a total loss. Private credit funds have "gates" (as seen with Blackstone). When things go bad, they simply lock the doors and refuse to give investors their money back. # Conclusion The Reddit author is fundamentally correct about the toxicity of the underlying assets. The current geopolitical environment—specifically the energy shock tying the Fed's hands on rate cuts—is breaking the business models of the 40% of private credit borrowers who are bleeding cash. However, because of the "gating" mechanisms, this doesn't trigger a sudden Lehman Brothers collapse. Instead, it triggers a **"distribution drought."** Retirees, pension funds, and institutional investors will find their money locked up indefinitely in depreciating assets. The systemic risk won't necessarily be banks failing overnight; rather, it will be a severe starvation of capital that deeply drags down the broader economy for years. OP is right to be bearish, even if the timeline of the collapse is stretched out further than 2008.

Joey_McFluffington

While there is a lot of garbage in private credit, some of the things posted are just flat out wrong. I’m happy to be proven wrong, but it is just totally false that defaults are at record highs. Public markets default rates are in line with long-term averages at roughly 3.5%. Private credit defaults, based on data that’s available are slightly higher than 5%, and that’s if you include non-accruals/PIK interest. Also, the CLO market is $1.2tn. Only 10% of this market consists of Private Credit CLOs, the rest are all public issuers. And the majority of Insurance company private credit is all IG. It has to be otherwise they would get destroyed in capital charges. Private credit doesn’t mean it’s all shit. Meta, Google, Apple, AB InBev etc. all issue in the private market.

danieldeubank

The recent moves by BlackRock (early March 2026) and now Morgan Stanley (March 11, 2026) to impose or tighten redemption limits on flagship private credit funds highlight growing liquidity stress in the $1.8–2 trillion private credit sector. This isn't isolated—it's part of a broader wave of investor anxiety, redemption surges, and structural mismatches in semi-liquid/open-ended private credit vehicles (e.g., non-traded BDCs and evergreen funds).BlackRock (HPS Corporate Lending Fund / HLEND) * What happened: Investors requested 9.3% redemptions ($1.2B) in Q1 2026; BlackRock enforced the standard 5% quarterly cap, paying out only \~$620M (per fund letter and Reuters/Bloomberg reports). * Why: First time HLEND (acquired via 2024 HPS deal) has gated since inception. Reflects broader unease over lending standards, software/AI exposure risks, and illiquidity in private credit. * Market reaction: BLK shares fell \~7–8% on the news (late morning March 6), contributing to a weak start for 2026 among alt managers. Morgan Stanley (North Haven Private Income Fund or similar) * What happened: Investors sought to redeem \~11% of shares outstanding; MS restricted redemptions (likely to 5% or similar cap), returning far less than requested (filing showed partial payouts). * Why: Echoes the same redemption pressure seen at BlackRock, Blackstone (BCRED raised cap to 7% after 7.9% requests + internal cash injection), Blue Owl (halted some redemptions), and others. * Context: MS private credit funds (part of MSIM's alternatives platform) face the same illiquidity mismatch: quarterly liquidity promises vs. long-duration, hard-to-sell loans. Broader Implications & Analysis * Structural problem: Private credit funds (especially retail-accessible BDCs) offer periodic redemptions (often 5% quarterly) to attract wealth investors, but underlying assets are illiquid. When requests exceed caps, managers gate to avoid forced sales at discounts → protects remaining investors but erodes confidence. * Why now?: * Rising defaults/restructurings (PIK interest, software sector stress from AI disruption). * Geopolitical/macro fears (Iran war → oil spikes → inflation/stagflation → Fed paralysis → higher borrowing costs). * Retail/wealth outflows: Wealth platforms pulled back after high-profile issues (e.g., First Brands/Tricolor bankruptcies). * Sector contagion risk: Gates at big names (BlackRock, MS) can trigger more redemptions elsewhere (fear of missing liquidity window). Could pressure asset prices, widen spreads, and slow new commitments. * Critical minerals tie-in: Private credit funds often finance mining/exploration (e.g., juniors in rare earths/scandium like NioCorp/IBC peers). Tighter liquidity → less capital for projects → delays in domestic supply chains (e.g., Elk Creek, Araxá analogs). Positive side: forced discipline may favor stronger balance sheets and proven projects. Bottom LineThis is a classic liquidity crunch moment in private credit—not a systemic crisis yet, but a warning sign. Gates protect funds short-term but can accelerate outflows if trust erodes. Watch for: * More managers following (e.g., Blackstone/Blue Owl updates). * Impact on alt manager stocks (BLK, MS, BX, OWL down sharply). * Potential Fed/SEC scrutiny on semi-liquid structures.

vba7

What is PIK?

iiiiiiiiiijjjjjj

I've worked in private credit in my last job. So many PE firms buying businesses they have no right buying using insane debt. This was very prevalent in data centers and the energy sector mostly midstream and solar markets. Most of the deals will not default, they waive covenants,allow extensions, PIK, etc with restructuring debt with different terms if need be. Interest payments were insane. I've seen one as has high as 14.0% + libor before the switch to SOFR, PIK of course. That deal went to shit and heard people actually lost their jobs because of it.

darkpplord

They been trying to cover it up with NAV financing and PIK. Anyone have insights into this to give an estimate of how long they got until their obligations run them over

Ok_Recognition2246

If your Financial Advisor recommends you invest in Private Equity or Private Debt aka Private Credit aka Leveraged Loan fund then please fire that Advisor and find a new one.  Experts in Finance world know that Private Credit funds are a disaster - when borrowers can’t make payments then the fund just adds it to their principal balance and calls it payment in kind (PIK) and does not report it as a default and continues to report it as earned interest even thought payment was never made. These are the funds that retail investors are now buying because institutional investors are demanding their money back.  Private Equity (PE) firms are keeping their bad investments alive by lending more Private Credit funds to the unprofitable companies in their PE portfolios.  When this all falls apart then we will get another book like the Big Short to explain to us how investors and got destroyed yet again by complex financial vehicles that made bad loans in the most stupid way possible - and the plethora of “new” credit rating agencies have rated all these debt funds as solid investment grade level due to the “diversified” exposure to thousands of companies - sound familiar?  Many of the individual borrowers are probably junk rated or worse - near insolvent - and the rating agency says the Private Credit fund is investment grade because they invested in small tranches of thousands of loans.  That’s exactly how the mortgage bond implosion happened.  Fake ratings based on financial engineering + bad loan covenants + illiquid borrowers = end of the credit cycle and horrible outcomes for people who invest in these funds. 

z34conversion

Great advice. Maybe I don't want to hold these bags much longer. For anyone else interested, to save time, here's what the answers are. Oracle’s (ORCL) current debt ladder, the seniority of their obligations, and the nature of the payments. As of late 2025, Oracle has moved into a more aggressive leverage phase, largely to fund its massive AI infrastructure and data center expansion. >1. The Debt Ladder: Maturity Profile Oracle's debt is characterized by a "ladder" of staggered maturities. They recently issued $18 billion in new notes (September 2025) to refinance maturing debt and fund capital expenditures. | Maturity Year | Estimated Principal Due | Notable Notes/Instruments | 2025 | ~$4.5B - $5B | 3.125% Senior Notes (due July) | 2026 | ~$5B - $7B | 2.650% Senior Notes (due July) | 2027 | ~$10B+ | $5.6B Term Loan + Various Senior Notes | 2030-2035 | ~$25B+ | New 2025 Issuances (4.45% - 5.20%) | 2045-2065 | ~$30B+ | Long-dated "Ultra-Long" Bonds (up to 6.1%) **2. Debt Seniority & Structure** Oracle’s capital structure is relatively "flat," consisting primarily of Senior Unsecured Notes. >Seniority: These notes are "senior," meaning they sit at the top of the repayment hierarchy compared to any subordinated debt or equity. However, since they are "unsecured," they are backed by the general credit of the company rather than specific assets (like a building or IP). >Mandatory vs. Discretionary: These are mandatory contractual obligations. Unlike dividends, which are discretionary, failure to pay interest or principal on these notes constitutes a default. >Payment-in-Kind (PIK): Oracle’s public debt consists of standard fixed-rate notes. They do not typically use PIK (where interest is paid with more debt/stock instead of cash). Payments are cash-settled semi-annually. **3. The "Waterfall" of Outflows** >A waterfall model for Oracle shows that cash flows are increasingly diverted toward "Fixed Charges" before reaching equity holders: > Operating Cash Flow: ~$18B - $20B (Annualized). >Interest Expense (First Leak): Oracle’s interest burden has grown significantly due to higher rates and higher principal. >Mandatory Principal Repayments: The "ladder" shown above. >Growth CapEx (AI/Data Centers): This is currently the largest "drain," with billions committed to Nvidia chips and power infrastructure. > Residual Cash (Dividends/Buybacks): Oracle has historically been a massive buyer of its own stock, but management has signaled that buybacks will not increase until gross debt is reduced. **4. Assessment of Repayment Ability** Oracle’s ability to service this debt is currently a "battle of the narratives": **The Bull Case (Solvency):** Oracle has a staggering $523 billion Remaining Performance Obligation (RPO). This represents a massive backlog of contracted revenue that acts as a "guaranteed" cash flow stream to service debt over the next decade. **The Bear Case (Liquidity/Risk):** Oracle's credit rating sits at BBB (S&P) / Baa2 (Moody's)—the lower end of investment grade. Their Credit Default Swaps (CDS) recently widened (to ~125 bps), suggesting the market is pricing in higher risk. **External Factors:** >**Interest Rates:** As old 2-3% debt matures, Oracle is forced to refinance at 5-6%, permanently raising their "cost of carry." >**Counterparty Risk:** A significant portion of Oracle's AI growth is tied to OpenAI. If OpenAI’s revenue falters or they shift providers, Oracle’s ability to "harvest" the cash from their expensive data centers is compromised. >**Partner Volatility:** Recent reports of data center partners withdrawing support for certain projects (December 2025) create execution risk for the very infrastructure intended to pay off the debt. **As of December 17, 2025, Oracle’s ultra-long-dated bonds are no longer just "long-term debt"—they have become a flashing siren for credit analysts.** >The market is currently pricing these bonds at deep discounts, with yields reaching levels typically reserved for "junk" or high-yield issuers, despite Oracle’s formal Investment Grade (BBB) rating. **1. The 2065 "Ultra-Long" Bond Profile** Oracle has two primary tranches maturing in 2065. Their performance over the last week has been staggering: **| Bond Maturity | Coupon | Current Price (Est.) | Yield to Maturity (YTM) | Price Performance |** | Aug 2065 | 6.125% | ~$88.10 | 6.95% - 7.10% | Down 11% from par | | Sept 2065 | 6.100% | ~$87.30 | 7.05% - 7.20% | Down 12% from par | | Mar 2061 | 4.100% | ~$64.34 | 6.77% | Deeply "underwater" | >**Context: For a BBB-rated company, a 7%+ yield on long-dated paper is highly unusual. For comparison, a 30-year US Treasury is yielding ~4.85%. Oracle is paying a ~220-230 basis point premium over the risk-free rate, suggesting the market sees a significant "duration risk" paired with credit deterioration.** **2. The "Distress" Signal: Trading Like Junk** The most alarming development today is that Oracle's newly issued bonds (from September 2025) are already trading at a total paper loss of ~$1.4 billion for the original investors. >The Yield Flip: Oracle’s senior notes are now yielding more than the average "BB" (junk-rated) bond index. >> The Blue Owl Shock: The news today that Blue Owl Capital walked away from a $10 billion data center financing deal in Michigan has sent shockwaves through the bond ladder. >>>The Liquidity Squeeze: Without this $10B in external partner capital, the "waterfall" model we discussed earlier breaks. Oracle must now either: >>>>Drain Cash: Divert more Operating Cash Flow to CapEx (starving buybacks/dividends). >>>>>Issue More Debt: Return to the bond market, but at these 7%+ "distressed" yields, which would be prohibitively expensive. **3. Impact on the Debt Ladder & Repayment** This price collapse in the 2065 bonds affects Oracle's ability to manage the rest of its ladder: >Refinancing Risk: Oracle has ~$7B due in 2026. Usually, they would "roll" this debt by issuing new long-term bonds. But with 2065 bonds yielding 7%, issuing new debt to pay off old 2.65% debt (the 2026 notes) will triple their interest expense for that tranche. >> The "Covenant" Ghost: While senior unsecured notes have few restrictive covenants, a drop to "Junk" status (BB+ or lower) would trigger "Change of Control" or "Coupon Step-up" clauses in many of their private credit agreements, further accelerating cash outflows. Summary: The Bond Market's Verdict **The bond market is essentially calling "bluff" on Oracle's AI growth story. While the stock market sees the $523B RPO backlog as a guarantee, bondholders see the $100B+ total debt and the failure of major financing partners as a sign that the "waterfall" is running dry.**

uncivil_engineer42

Just realized after some Googling that Carvana's cash interest expense should increase some ~30-50% over the coming quarters because the PIK toggle rate for their repurchased senior notes goes away (it's been 2 years). They paid $105M on the PIK toggle this last quarter. Diluted EPS would've been $0.46/sh vs. $1.03/sh reported. How do you feel about investing in a 200+ P/E used car company that lends 50% to a subprime market with record high delinquencies?

ehcanadianmoose

Non-accruals and PIK income up. Seems like kicking the can down the road. How long can they warehouse losses?

artsnob11

There are a couple of things that are scary. The first is definitely the depreciation on GPU’s the slick accounting move to show as income is alarming but also what’s very scary is the PIK loans private equity holds these and doesn’t tell us about the value of the assets it could go from being worth 100% to being worth 0% in one day

brennfl81

“involved exchanging its 0% Convertible Senior Notes due 2027 for new 7.00% Convertible Senior Secured Second Lien PIK Toggle Notes due 2030 and shares of its common stock. This exchange resulted in the issuance of $209,721,000 in new convertible notes and 317,834,446 new shares”

Cornshortage

There are reason BYND is continuing to drop, go look at the voting package they sent out to shareholders. "The Board recommends you vote FOR the following proposal (s): 1 through 5 [1.To](http://1.To) approve, in accordance with Nasdaq Listing Rule 5635(d), the potential issuance of shares of the Company's common stock, par value $0.0001 per share, upon conversion or equitization of up to $215.0 million in aggregate principal amount of newly issued 7.00% Convertible Senior Secured Second Lien PIK Toggle Notes due 2030 ("New Notes"), or payment of accrued interest or make- whole payments in the form of Common Stock, which issuances would, in the aggregate, exceed 20% of the number of shares of Common Stock issued and outstanding immediately prior. [2.To](http://2.To) approve an amendment and restatement of the Beyond Meat, Inc. 2018 Equity Incentive Plan (the "Restated Plan") to increase the number of shares of Common Stock authorized for issuance thereunder, including for purposes of the issuance of certain awards granted to key employees of the Company out of such increase. [3.To](http://3.To) approve an amendment to the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 500,000,000 to 3,000,000,000 in order to support, among other things, the additional share issuances of Common Stock issuable upon conversion of the New Notes and under the Restated Plan. [4.To](http://4.To) approve a series of 30 alternate amendments to the Company's Restated Certificate of Incorporation to effect (1) a reverse stock split of the issued and outstanding shares of Common Stock and (ii) a proportionate reduction in the number of authorized shares of Common Stock (and correspondingly decrease the total number of authorized shares of capital stock). [5.To](http://5.To) approve one or more adjournments of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the foregoing proposals at the Special Meeting or any adjournment (s) thereof. \*NOTE\* Such other business as may properly come before the meeting or any adjournment thereof." Best of luck, I'd say your best bet is to average down sharply and hope for a rally to allow you to exit.

ChristianRauchenwald

For those that wonder what the tweet says: >Beyond Meat, [$BYND](https://x.com/search?q=%24BYND&src=cashtag_click), has announced the final results of its exchange offer to swap its existing 0% Convertible Senior Notes due 2027 for new 7.00% Convertible Senior Secured Second Lien PIK Toggle Notes and shares of common stock.

GasPositive1794

$BYND Beyond Meat, $BYND, has announced the final results of its exchange offer to swap its existing 0% Convertible Senior Notes due 2027 for new 7.00% Convertible Senior Secured Second Lien PIK Toggle Notes and shares of common stock.

Ecstatic_Climate_111

> On September 29, 2025, the Issuer commenced an exchange offer (the "Exchange Offer") to exchange any and all of its 0% Convertible Senior Notes due 2027 (the "Existing Convertible Notes") for a pro rata portion of (i) up to $202.5 million in aggregate principal amount of its new 7.00% Convertible Senior Secured Second Lien PIK Toggle Notes due 2030 (the "New Convertible Notes") and (ii) up to 326,190,370 Common Shares. This isn't the good news you think it is.

bonelessspareribs

Not sure I follow. The people who converted have new bonds worth ~20% of the par value of the old bonds and at 7% PIK. They also received 1 share for every ~$3 of par value of bonds they held. My point is that they still own bonds and now at a higher yield (and if they bought the old bonds at 20% of par then their bond position hasn’t changed). I also don’t understand the comment that “we’re dealing with equity investors now.” 80% of the shares are owned by investors who converted their bonds. My point is that they still own convertible bonds and at a higher yield and so they don’t need to make up their entire cost basis from the initial bond purchase with sales of common stock. I’m also just now following the logic of how 80% dilution is expected to make the stock price go up

bonelessspareribs

The ~$2.90 conversion price is only relevant if you assume the bond holders bought at par. Assuming they bought recently, when the bonds were trading below 10% of par, the bond holders have effectively received $2 of debt with a 7% PIK coupon for every $1 of (no coupon) debt they previously owned while also getting 1 share of the company for every $3 of bonds they owned. The shares are effectively option value in that trade and the increased the coupon on their bond from 0% to 7%

bonelessspareribs

The interest on the new convertible notes is PIK so they won’t need to fund the 7% in cash. But I agree with you that’s kicking the can down the road given the lack of operating cash flow. Also there will likely be continued shareholder dilution if either the new notes convert or they raise more equity for cash. What’s amazing to me is that a transaction that diluted shareholders by 80% is somehow being spun as a good buying opportunity

Captcha_Deez_Nuts

Aren’t tight credit spreads seen as an indicator of a good economy because the risk of company debt is similar to the risk of govt debt (low)? I get that govt yields have increased due to lower credit rating and higher risk, but that isn’t directly related to the company debt yields right? Also for the private credit- I’ve seen this float around a lot but no one explains it. Is it purely that a lot of struggling companies take PIK loans and expect to refinance the debt+interest? It seems like most companies still have pretty low interest coverage ratios and leverage ratios for their respective industry (tech is a little more levered now). These are genuine questions as I’m trying to learn. Thanks

pat_188

hey PIK-Toggle...which broker is giving 0.15 a contract....I got 0.45 from schwab...0.85 from fidelity.....Thank you in advance

its-me-reek

Additional DD Appendix -------- Apld is cash strapped hence the PIK loan . A pik bridge loan Like it accrues apld pays nothing now but every day the loan accrues value so apld not losing cash it can use it to pay interest on other loans until it gets a loan with favorable finance which will only be favorable with a lease. PIK bridge loan actually is for speed and execution rather than cash strapped but that’s just my take and there is usually a make whole floor like 1.10x so even if they repay fast the lender still gets that return and the cash is mostly locked to pf2 gear site work and a small working capital bucket not just any use But the PIK trigger is Oct 31, while the vote is nov 5th. I have to think about this more I think it’s risk management. Lease isn’t completely assured but basically there and gives them a way to finance if they miss the deadline and if they sign the lease the note has to be taken out within about 90 days and they can do it sooner the 90 is the outer bound if no lease by the date the note comes due around feb 1 26. Could also be extremely basic risk management for getting a PIK loan and the deal is certain but they are progressional and can't enter naked PIK loans hence the timing.... Like the timing it’s intentional the vote is after Oct 31 like it means in the small chance that we miss, let’s put this backstop so we still have ATM/follow‑on/convert options and don’t hit the bridge maturity naked and the vote is authorization headroom not automatic dilution. APLD knows the highest risk to its share price for all its project is hitting timelines and execution mkt knows it now clearly too, and from this its speed and build now execution plues really advd talks and market sees build now plus advanced talks plus a forced timeline however it will prob crash a bit if we don’t have a lease by Oct 31. I would estimate in the next 2-5weeks though could even be days if docs and wires are lined up Almost surely the offering vote is not bearish though at this point of time given the 8k . So why the PIK loan if imminent .... well I think the PIK bridge loan is because negotiating good terms once the deal is signed may take a few weeks and they want to start now because it’s imminent!! Given this thought process it could come in a few days. Imminent imminent imminent it's immenten prepare your butt hole!

Sheamus824

What is Coliseum's average if the warrants and debt are converted with the PIK?

FinTecGeek

The situation from 2021 to present has laid a lot of dry powder for a significant fire to erupt. Near-zero interest rates led companies to borrow at never before seen levels and they did not invest in anything, they used the money to buy back their own stock. The vast majority of the money borrowed at the ultra low rates has no tangible asset on the other side to represent it. Now, as Powell mentioned, the private equity/credit market is exposed after growing to 10x the size of the real economy in less than a decade. Their stress tests did not include what happens if the White House itself adopts damning economic policies that hit PIK triggers across the board and freeze up liquidity and refi operations. We're in a very dry forest here and someone's playing with matches on the other side of the ridge...

happy_snowy_owl

You and u/PIK_toggle stripped away all context of my post, which was about a person entering retirement. That tells me that you don't understand what sequence of return risk means, nor have you ever bothered to look at retirement withdrawal strategies.

Infinite_Ad_3929

They generated $400mm of FCF last quarter…they don’t have debt payments it’s PIK debt. What Twitter account do you get your financial information from dude jesus…

Biotechpharmabro1980

? I traded PIK this morning in pre market

Biotechpharmabro1980

https://preview.redd.it/a4yqtxe68m8e1.jpeg?width=1179&format=pjpg&auto=webp&s=35e42998197f5e81541041c42c9115e8e6d2aaf6 Traded PIK.

Biotechpharmabro1980

Nope. Today’s obvious pick in my eyes was RELI and PIK Trades PIK pre market for twenty mins https://preview.redd.it/odlhkwcfll8e1.jpeg?width=1179&format=pjpg&auto=webp&s=cd4d94f9cfedb94bcc5ed90b241b3e434189e3d7

Biotechpharmabro1980

You got it bud ! I traded PIK this morning for 20 mins https://preview.redd.it/3up6bpn9ll8e1.jpeg?width=1179&format=pjpg&auto=webp&s=8c46ed7f8f750e5d898ee541b3897ec1ba4d8e73

tm2invest

PM runners $RELI $GTBP $PIK $TRAW $EDBL $RAPT 🎉💥🔥

Biotechpharmabro1980

Nope… your stock pick to day trade for intraday volatility should be whatever is getting the most attention for the day when pre market starts https://preview.redd.it/nbdjju6wfl8e1.jpeg?width=1179&format=pjpg&auto=webp&s=c74c3e1c8c085af5c3c217f108cfd4f73e39d11e Today was PIK

Biotechpharmabro1980

Traded PIK today https://preview.redd.it/iagfdc2sfl8e1.jpeg?width=1179&format=pjpg&auto=webp&s=3c5ea252a4afa63535fc2a70654551e32c1aeb87

Biotechpharmabro1980

Nope. Traded PIK today. https://preview.redd.it/ihhj18fqfl8e1.jpeg?width=1179&format=pjpg&auto=webp&s=8fabb762ed1f2fc3174ad9c9c78372751ee3607a

Biotechpharmabro1980

https://preview.redd.it/kg1wld97bl8e1.jpeg?width=1179&format=pjpg&auto=webp&s=78533569d27c1e2529c564f88feda8e8b5ac6357 2.1k done ! PIK traded today

greytoc

Sorta - there are also PIK (payment in kind) bonds where interest is paid in more bonds. These types of financing structure for distressed companies are sometimes referred as death-spiral financing. There are high-profile public companies that were/are failing that tried to save themselves through dilution and through these types of financing arrangements.

palindromic

Oh yeah well PIK is up 90%.. Kidpik corporations.. I do not want to speculate here

Rule_Of_72T

PSEC is a bottom of the barrel BDC. It often trades at the largest discount to NAV in the industry because everyone knows they keep their NAV propped up to keep management fees high. The management company that PSEC pays unusually high fees to is run by PSEC’s CEO and president. It’s a clear conflict of interest. So while John Barry takes no salary from PSEC, he ensures the big fees keep rolling into his management company. By buying more shares, Barry is able to fend off any other shareholders that would vote to move to a different management company. PSEC is permanent capital that exists to generate fees for Barry. PSEC usually has the highest yielding investment grade bonds as the market recognizes the risk. PSEC has shifted to flooding the market with preferred stock. Preferred stock dividends will remain fixed while common shareholders have rights to the remaining cash flow. Unsurprisingly PSEC recently reduced the dividend to shareholders by 25%. PSEC makes loans to businesses. An unusually high % of those loans are PIK (payment in kind). The companies PSEC lends money to don’t have enough cash to pay them. Eventually, something like PGX happens where the company goes bankrupt and now PSEC takes over a loser of a business. If you want to own a BDC, own a quality company like MAIN, HTGC, or BXSL.

r8zup

[https://investor.amctheatres.com/sec-filings/all-sec-filings/content/0001411579-24-000077/amc-20240930x10q.htm#Item1LegalProceedings\_929795](https://investor.amctheatres.com/sec-filings/all-sec-filings/content/0001411579-24-000077/amc-20240930x10q.htm#Item1LegalProceedings_929795) Page 75: As of November 5, 2024, there were 375,679,699 shares of Common Stock issued and outstanding. We expect to issue additional shares of Common Stock to raise cash to bolster our liquidity, to repay, refinance, redeem or refinance indebtedness (including expenses, accrued interest and premium, if any), for working capital, to finance strategic initiatives and future acquisitions, to settle conversion of the Exchangeable Notes, including any PIK Notes and Additional Exchangeable Notes, or for other purposes. We may also issue preferred equity securities or securities convertible into, or exchangeable for, or that represent the right to receive, shares of Common Stock or acquire interests in other companies, or other assets by using a combination of cash and shares of Common Stock, or just shares of Common Stock. The holders of the Exchangeable Notes may from time to time convert the Exchangeable Notes and Additional Exchangeable Notes into shares of our Common Stock, and Muvico may elect to pay interest-in-kind by issuing PIK Looks like there may be more dilution on the horizon

Uisce-beatha

I'm saving this post too, solely because I did read through some of the linked material in here and this does seem like a house of cards. I want to go back when they fall and look at some of the things being said in here so I can laugh. >**From 10-k filing Feb. 24** **Risks Related to Our Liquidity** •our substantial indebtedness; •our ability to generate sufficient cash flow; •changes in capital markets; •our access to structured finance, securitization, or derivative markets at competitive rates and in sufficient amounts; •the risks related to our securitizations; and•risk retention rules.*Risks Related to Ownership of our* **Class A Common Stock** •the trading price of our Class A common stock is volatile; •risks related to the actions of short sellers of our Class A common stock; •the Garcia Parties control us and their interests may conflict with our or our stockholders’ interests in the future; •dilution due to issuance of additional Class A common stock or LLC Units in the future; •use of the net proceeds from our at-the-market program; •we could sell substantial blocks of our Class A common stock in the future; •the **Company's Tax Asset Preservation Plan could hinder the market for our Class A common stock**; •we have no intention to pay dividends on our Class A common stock for the foreseeable future; •Delaware law and our charter may prevent stockholders from changing decisions made by management; •the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters; and •we may issue shares of preferred stock in the future. **From Form 4 filing 2024** **Our substantial indebtedness could adversely affect our financial flexibility, ability to incur additional debt, and our competitive position and prevent us from fulfilling our obligations under our credit agreement and other debt instruments.** As of June 30, 2024, we had outstanding, on a consolidated basis (1) $205 million aggregate principal amount of our 5.625% senior unsecured notes due 2025 (the “2025 Senior Unsecured Notes”), 5.500% senior unsecured notes due 2027 (the “2027 Senior Unsecured Notes”), 5.875% senior unsecured notes due 2028 (the “2028 Senior Unsecured Notes”), 4.875% senior unsecured notes due 2029 (the “2029 Senior Unsecured Notes”), and 10.250% senior unsecured notes due 2030 (together with the 2025 Senior Unsecured Notes, the 2027 Senior Unsecured Notes, the 2028 Senior Unsecured Notes, and the 2029 Senior Unsecured Notes, the “Senior Unsecured Notes”), (2) $4.4 billion aggregate principal amount of our 9.0%/12.0% cash/PIK senior secured notes due 2028 (the “2028 Senior Secured Notes”), 9.0%/11.0%/13.0% cash/PIK senior secured notes due 2030 (the “2030 Senior Secured Notes”), and 9.0%/14.0% cash/PIK senior secured notes due 2031 (together with the 2028 Senior Secured Notes and 2030 Senior Secured Notes, the “Senior Secured Notes”), which includes $210 million aggregate principal amount representing payment-in-kind interest, (3) $72 million aggregate principal amount of borrowings under our amended and restated inventory financing and security agreement with the Ally Bank (Ally Capital in Hawaii, Mississippi, Montana and New Jersey) and Ally Financial Inc., effective November 1, 2023 (the “Floor Plan Facility”), and the applicable finance receivable facilities, (4) $223 million aggregate principal amount of indebtedness represented by our finance lease agreements between us and providers of equipment financing, (5) and an outstanding balance of $334 million relating to a secured borrowing facility through which we finance certain retained beneficial interests in our securitizations. Also, as of June 30, 2024, we had, on a consolidated basis, $485 million of other long-term debt related to our sale leaseback transactions. Our substantial indebtedness could have significant effects on our business. > **Despite current indebtedness levels, we may incur substantially more indebtedness, which could further exacerbate the risks associated with our substantial indebtedness.** We may incur significant additional indebtedness in the future, subject to the restrictions in the agreements governing our indebtedness and the Floor Plan Facility. We may also pursue investments in joint ventures or acquisitions, which may increase our indebtedness. If new debt is added to our currently anticipated indebtedness levels, the related risks that we face could intensify. Holy shit this company has a lot of unsecured debt and metric shit ton of extra risk factors that don't come with other companies in this sector. It will be interesting to see this play out

Lemonibluff

Indeed. Maybe the start of the PIK Debt Payment might trigger some downward spiral.

Superb_Tour_5196

PIK’d $285MM in interest over the last 6 months. Paying interest with more debt is a cheat code to boosting net income. Also, only $18MM is actually attributable to Carvana shareholders.

MWraith

The end of all this has to come, at the latest, when CVNA is no longer entitled to make PIK of interest on the bonds, but has to start paying cash interest (as it has no free cash flow to do so, and no hopes of ever generating any, as its accounting profits are all fugazi, like you said). When does CVNA have to start paying cash interest, Q1 2026?

idkwhattosay

Banks and CRE owners are doing everything to smooth that - PIK games, private credit bridges, lot of money in CRE and a lot of money very interested in it not going tits up.

fractal_fables

so basically syndicated credit markets are restructuring (refinancing) all the debt for the past 6 months, and those loan rates have gone down by 50 basis points. it's not the banks although they are the middleman. companies are also taking advantage of PIK features to refinance or accrue capital for growth now instead of paying cash they are just eating the interest until the expected rate cuts happen by the fed to restructure all of it later. these shenanigans are basically aggressive underwriting during a hot economy where traditional loans and refinancing aren't available. but it makes you wonder if this all hinges on rate cuts, and these private credit markets are adding to inflationary pressure by moving for growth now which in turn pushes back the fed rate cuts they desperately need to restructure their debt then are they acting against their best interest? these underwriters are the only ones' that seem to be benefiting from this which sounds a lot like the 2008 mortgage crisis only they are refinancing debt in the private markets, how they fuck do you even bail them out? some really shady shit going on right now the only way these loans work out is if these companies actually outpace the interest rates which are basically compounding on their debt which seems impossible

fractal_fables

so basically syndicated credit markets are restructuring (refinancing) all the debt for the past 6 months, and those loan rates have gone down by 50 basis points. it's not the banks although they are the middleman. companies are also taking advantage of PIK features to refinance or accrue capital for growth now instead of paying cash they are just eating the interest until the expected rate cuts happen by the fed to restructure all of it later. these shenanigans are basically aggressive underwriting during a hot economy where traditional loans and refinancing aren't available. but it makes you wonder if this all hinges on rate cuts, and these private credit markets are adding to inflationary pressure by moving for growth now which in turn pushes back the fed rate cuts they desperately need to restructure their debt then are they acting against their best interest? these underwriters are the only ones' that seem to be benefiting from this which sounds a lot like the 2008 mortgage crisis only they are refinancing debt in the private markets, how they fuck do you even bail them out? some really shady shit going on right now

Interesting-Taste855

Incase anyone missed this... AMC Entertainment Holdings AMC said Wednesday in a regulatory filing it has agreed to issue a total of 23,280,295 shares of its Class A common stock, par value $0.01 per share, in exchange for $163.9 million of its 10%/12% Cash/PIK Toggle Second Lien Subordinated Notes due 2026. The transaction also accounted for around $6.9 million in accrued interest, setting the implied share value at $7.33 each, the company said in its 8-K filing with the US Securities and Exchange Commission.

Jeff__Skilling

>My understanding is that both holders benefit from a rise in share price, but preferred owners get a fixed dividend while common holders do not. No, not at all? Prefs don't fluctuate in value nor do they have the unlimited upside that common shares do; upside is capped, generally at the original price they were issued at. The advantages they have over common stock have largely been mentioned: (1) higher up in the surety stack / have liquidation preference in the case of bankruptcy and (2) have priority over common in terms of dividend -- e.g. company cuts dividend to $0.00, and if they want to make a distribution, they usually have to pay off whatever prefs are owed in arrears (usually some % of the fact value of the preferred share stated in the original term sheet) before a penny goes to common. That all being said, it doesn't really answer your original question as to why would anyone ever buy common stock over preferred (aside from the aforementioned difference in upside potential). Really, the only case where I see prefs in a client's cap table is (generally) in situations where common equity has maxed out total leverage on a potential deal / transaction / project (almost always very project finance-y) and you need capital or are underfunded to whatever degree or dollar amount. In these situations, common equity can't use debt, and they refuse to dilute themselves (by giving up more common), so the answer ***generally*** is you shop the available spot in the financing syndicate to a bunch of private credit shops, infrastructure funds, SWFs, and PE funds that wants the (debt-like) cash yield and risk exposure by in the project......but you've hit your leverage ceiling + these potential capital providers don't want to cripple some long-dated project (e.g some greenfield mining project or nuclear energy facility or interstate pipeline) by overburdening it with additional fixed cash interest obligations (since most of these projects won't start generating organic FCF for anywhere from 6 to 20 years) or in the early operating phases of said project where cash flow starts to trickle out in the first few years of operations (usually E&P related, both energy and mining). So what ends up happening is common equity negotiates a very tailored and bespoke pref term sheet that can have a whole host of different features that keep the project fully financed without over-levering or overly constraining early FCF (that might result in missing an interest payment and defaulting) The most common examples I can think of are (a) common usually has the option to make mandatory distributions to preferred in kind (PIK) (and usually at higher rates than what they'd be do if distros are paid in cash) or (b) including a common conversion feature (that can get endlessly onerously convoluted).

Individual_Ad_5609

I thought your DD on clothing was interesting and thorough, didn't act on it SMH! Any thoughts on PIK? Its pretty cheap to get into, but I'm new to all of this.

Ill-Expression1737

now a bag holder of PIK 

Ill-Expression1737

i really bought PIK becauseof some sht i saw on here yesterday smh..

Ill-Expression1737

who tricked me into buying PIK for the squeeze

Ill-Expression1737

PIK is the play today

2DaM0o0n

Can anybody please tell me WTF is up with KidPik? Tag is PIK. This thing has gone from 3$ to 7$ to 3$ to 7$ with zero volume the last few weeks. All after hours action. And what a stupid name for a stock.

DavidNexus7

14% PIK. So it’s not exactly like they have to come up with that cash every payment.

hknight54

I know you guys are option regards, and PIK does not have any tradable options, but there's a decent chance to 2x or 3x with just shares.

hknight54

Decent entry point on PIK. holding steady

hknight54

PIK is parabolic

hknight54

PIK holding

hknight54

What's the deal with PIK. I can't find any info

yeahnah09

what’s going on with PIK???

shortsqueezerr

Take a look at PIK and LYT for example

Profit_Tax_Poor69

thinking about holding PIK overnight. I'm terrified.

MyNi_Redux

CVNA is benefiting from: 1. Pushing off BK by 2 years with the PIK financing 2. Short covering resulting from share price rising, in turn because imminent BK is off the table 3. A general very bullish market CVNA is the kind of junk that does well until the piper comings calling. Until said piper appears, it's probably premature to look into puts.

anow2

Not sure why you got downvoted. Did /u/PIK_Toggle really think the "data" was limited to making a map?

EndSection280E

Gotham isn’t buying, they and the other lenders are receiving PIK shares in lieu of cash for interest and penalties on secured loans that have been in default for 18 months. Outstanding shares of MM now 1,528,778,312 as of 1/3/2024.

No_Nefariousness6370

"Yesterday, the movie theater chain released a [Form 8-K](https://investor.amctheatres.com/sec-filings/all-sec-filings/content/0001104659-24-000348/tm241463d1_8k.htm) documenting a debt for equity exchange. Between Dec. 28 and Dec. 29, AMC agreed to enter into a series of privately negotiated exchange agreements. These agreements will see AMC issue 3.25 million shares in exchange for $22.5 million of aggregate principal amount in its 2026 10%/12% Cash/payment-in-kind (PIK) toggle second lien subordinated notes. These shares carried an implied value of $6.94 apiece."

BeTheBeach

Better pro tip... Increase zone 2 exercise because it will use lipolysis to burn fat for ATP instead of Krebs cycle to burn glucose. The two free elections attached to the third glyceride carbon in a diglyceride interfere with PIK3's ability to move the glue transport tube to gradient within you muscle cell and this is the actual cause of insulin resistence. Burrn intra muscle diglecerides and the weight will fall of.

AndersKingern

PIK

AndersKingern

PIK ready

Dry-Check8872

Depends on when the coupon is paid and whether an investment providing a 15% yearly return is available at such time. Sure I guess you could compound interest with a PIK bond but I'm pretty sure that's not the case here.

ohitgoes

My layman's understanding is they basically pushed out bondholders who didn't want to hold and gave a first position to Apollo. PIK is still a liability. In this case it seems all accrued value goes to Apollo

RetardStonk

Mm love me a good PIK deal in this credit market

RaiseTheRoofe

They did not restructure the debt, that would imply that there's now a structure for it, that a real company could operate with. There is not. Oversimplification of PIK below Under the new debt organization, the lenders have agreed that this company is not capable of paying the interest on the loans they've issued, so instead of interest being paid, the loan balance increases over time. There's many structures where this is workable, $CVNA is not one of them. Retail investors will always lose money and this is why.

ESTTX7

## Carvana spins lower after S&P warns debt deal could be tantamount to default Jul 20, 202309:05 PDT S&P Global Ratings lowered its credit rating on Carvana to CC from CCC after the company entered into a debt restructuring agreement for up to $4.3B worth of senior secured notes. The ratings agency said it views the proposed transaction as distressed and said it would be tantamount to default if completed because lenders will receive less than originally promised. The negative outlook reflects S&P's expectation that it will lower the issuer credit rating to D (default level) upon completion of the proposed exchange. Shortly after the proposed restructuring, S&P said it would raise the ratings to a level that reflects the ongoing risk of a conventional default or future distressed restructurings. The proposed transaction is expected to somewhat extend Carvana's maturities and offer significant cash interest cost savings due to the PIK option. However, the principal amount of the new securities offered is less than the original par amount, the new maturities extend beyond the original dates, and the timing of payments will be slower by adding a PIK feature. "In addition, debtholders are essentially being primed by the senior position of the new notes. In our view, Carvana is pursuing this transaction because its capital structure is unsustainable and the company has limited options to reduce its debt burden and improve its cash flow organically."

shyrambo

Weird that CVNA took PIK interest loan and all Analysts are above their range. Its a slow BBBY.

misterp_1000

1. 6.5B dollar in long term debt, from what I can tell the new PIK bonds forces the company to pay $600M yearly interest 2. market cap is $7.53b, $9.751b in total liabilities, lost $100m this quarter and used car sales are cooling. 3. EPS of -$0.55 How can this go wrong