PIK

_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

misterp_1000

Literally a shitco They will pay $600M annual interest on the new PIK bonds

SwissCrypt

You mean the short seller who has made -90% on his last call on his report? Explain the 25+ interest rate related party PIK notes to me? This is a pump-and-dump and it's not allowed on this sub. "A member of the California energy commission has been telling customers that EOS is the winner based on cost, tech, etc.". I have reported above by the way, this is pumping based on false attributions. Nothing of the sort was ever said and it has no place in this sub.

SwissCrypt

The P&D going on here is unheard of, this company is a fraud. This year 25+ interest rate PIK notes were issued to a related party, don't fall for this stuff.

ZealousidealLine7378

$ERES 's vote is tomorrow and for the future success of the warrants, it is important to note the very low minimum cash closing condition ($1MM) relative to the trust, and more importantly, the fact that the billionaire Sponsor Terry Pegula is contractually required to backstop the difference in any redemptions relative to the minimum cash condition. Since the firm is consistently profitable per actuals on their financial reporting in SEC updates, they're in a good position to perform well from here on out and the warrants stand to gain. From a August 2022 posting on SPACRESEARCH.com: Transaction Overview The combined company will have an estimated post-transaction enterprise value of $618mm, assuming no redemptions. Cash proceeds from the transaction will consist of up to $98mm of cash held in ERES’s trust account (before redemptions and the payment of certain expenses), plus any additional cash raised via a private placement prior to closing of the transaction. The net proceeds from the transaction will enable Abacus to lower its cost of capital, scale its Hold Portfolio and begin securitizing policy portfolios. Abacus owners will roll 100% of their existing equity holdings into the combined company and are expected to own approximately 70% of the combined company on a non-fully diluted basis immediately following the closing of the transaction, assuming no redemptions by ERES’s public stockholders. Both Boards of Directors have approved the transaction. The transaction is expected to close as early as the fourth quarter of 2022, subject to shareholder approval and other customary closing conditions. Following the closing of the transaction, the existing management team of Abacus, led by CEO Jay Jackson, will continue to operate and manage Abacus. Additional Details Closing is subject to customary conditions, including the approval of the Florida Office of Insurance Regulation and Abacus being relicensed as a life settlement provider by the California Department of Insurance, as well as a **minimum cash condition of $1mm** Outside Date: 1/27/2023 **\[later revised to July 27, 2023\]** Total merger consideration of $618mm worth of shares at $10.00 per share to be paid to sellers To the extent the aggregate transaction proceeds exceed $200mm, at the election of the Abacus members, up to $20mm of consideration shall be payable in cash on a pro rata basis to Abacus members Sellers agreed to a lock-up period of: 85% shares for 24 months following closing 15% shares for 180 days following closing ERES' sponsor agreed to the same lock-up as the sellers **ERES' sponsor agreed that, in the event that immediately prior to closing, the aggregate transaction proceeds are less than the minimum cash amount, ERES' sponsor will make an unsecured loan to ERES (the “Sponsor PIK Note”) in an amount equal to the lesser of** **(i) the difference between the minimum cash amount and the aggregate transaction proceeds and** **(ii) the sum of the fees, costs and expenses incurred by the ERES Parties in connection with the transactions and the fees, costs and expenses incurred by Abacus and Abacus members in connection with the transactions.**

Balthazar130

Just looking at ARCC, I do see a few non-cash items deducted from net income in their cash flow statement. These are primarily PIK interest income received on loans they've extended to their clients. PIK is a form of interest paid in kind (i.e., tacked onto the principal, only paid in cash at maturity). PIK interest would be recognised by ARCC as income in the P&L, but excluded from the cash flows. That's normal. But the primary driver of negative cash flow from operations is the fact that they extend more new loans than they recoup old loans who have reached maturity and are repaid to ARCC by their clients. Looking at FY 2022: • proceeds from sale and repayment of investments (i.e., clients repaying old loans to ARCC) = $7.747 billion • purchase of investments (i.e., new loans made by ARCC to clients) = $(9.852) billion Basically, they're still growing their asset base.

Gordon_Gexo

Wrong, PIK means payment in kind **MODS**

Gordon_Gexo

I'm just copy pasting so: >Great company, and will make bank when everyone defaults from their loans when they rake all the cars back. Car casino >It's just insanely undervalued atm, it will be fair value eventually but the haters are idiotic when you compare it to any other tech company On people saying bankruptcy is on the table: >No reason for it to fail, they're screwing over bond holders to keep the ball rolling. Leadership won't let it fail is 1. People actually like using the platform to buy cars is 2. On debt: >"Sorry bond holders, you're not getting cash for your bonds.. you're getting newer bonds.. due at a later date. Oh and with those new bonds are cash pik toggle, we have the option of paying the 9% interest in cash OR PIK (payment in kind) where we give you EVEN NEWER bonds as a dividend. Debt secured by used cars btw.. the same ones we claim back if customers default" >Debt holders are cornered. Will save them 100mln a year, will break even by October

Gordon_Gexo

CVNA "Sorry bond holders, you're not getting cash for your bonds.. you're getting newer bonds.. due at a later date. Oh and with those new bonds are cash pik toggle, we have the option of paying the 9% interest in cash OR PIK (payment in kind) where we give you EVEN NEWER bonds as a dividend. Debt secured by used cars btw.. the same ones we claim back if customers default" Debt holders are cornered. Will save them 100mln a year, will break even by October

Gordon_Gexo

"Sorry bond holders, you're not getting cash for your bonds.. you're getting newer bonds.. due at a later date. Oh and with those new bonds are cash pik toggle, we have the option of paying the 9% interest in cash OR PIK (payment in kind) where we give you EVEN NEWER bonds as a dividend. Debt secured by used cars btw.. the same ones we claim back if customers default" Debt holders are cornered. Will save them 100mln a year, will break even by October

VeryStableGenius

> I have no idea about the substance of the case against them but they were forced to pay their bondholders with shares of the company I don't think this was a loss for for the private equity. *These* guys loaded the company up with debt, pocketed the borrowed money, took the company public again (now crippled with debt), and rowed off in their zillion dollar lifeboat as the ship slowly sank. From the article: > In order to buy Remington, Cerberus, as most private-equity firms would, created a new entity, a holding company. Instead of Cerberus buying a gun company, Cerberus put money into the holding company, and the holding company bought Remington. The entities were related but — and this was crucial — each could borrow money independently. In 2010, Cerberus had the holding company borrow $225 million from an undisclosed group of lenders, most likely hedge funds. Because this loan was risky — the lenders would be paid only if Remington made a lot of money or was sold — the holding company offered a generous interest rate of around 11 percent, much higher than a typical corporate loan. When the interest payments were due, the holding company paid them not in cash but with paid-in-kind notes, that is, with more debt. These are known as PIK notes. > The holding company now had $225 million in borrowed cash. Cerberus, meanwhile, owned most of the shares of the holding company’s stock, basically slips of paper they acquired when they created the holding company. The handoff happened next: The holding company spent most of the $225 million buying back its own stock, effectively transferring all the borrowed cash to Cerberus. Cerberus would keep that money no matter what. Meanwhile Remington continued rolling along as though nothing had happened, because Remington itself was not responsible for the holding company’s debt. Remington was just an “operating company” that the holding company owned, something that allowed the holding company to borrow money, the way you would take a necklace to a pawnshop. These were garden-variety maneuvers in a private-equity buyout. In the trade, this is called “financial engineering.” People get degrees in it. > In April 2012, Cerberus did something fateful, which probably seemed smart at the time. It had Remington borrow hundreds of millions of dollars and use it to buy the holding company’s debt, effectively transferring responsibility for the principal and the interest payments onto Remington. America’s oldest gun company now owed the money that Cerberus had used to pay itself back for having bought the company in the first place. There were plenty of sensible reasons to do this. Gun sales were high, and the debt that Remington took out was cheaper to service than the paid-in-kind debt. > But there was a catch. Because the operating company borrowed the money with a normal loan — and not with PIK notes — interest payments were required in cash. Suddenly Remington was carrying hundreds of millions of dollars in debt that, if it could not be paid, would cause the business to go bankrupt. > By the time the factory opened in Huntsville, the various players stood in vastly different positions. The private-equity firm had made back its initial investment and was playing with house money. Remington owed hundreds of millions that it hadn’t borrowed. And its workers, urgently, had to make a lot of guns.

qabadai

Generally most lenders will work with you on a covenant breach. As long as you can make interest payments, there’s some openness to modifying agreements. They don’t want to take control of the company and they don’t want to do anything that increases future refinancing risk. But they’ll charge you for it (e.g. 0.5%-2% of loan balance payable as fee, PIK warrants, etc).

Balthazar130

Just trying to make sense of it all, without offering any specific advice, because I haven't looked into the company in details: The company is not doing well, and its credit rating was [downgraded](https://www.moodys.com/research/Moodys-downgrades-Diebolds-CFR-to-Caa2-outlook-negative--PR_466235#:~:text=New%20York%2C%20May%2020%2C%202022,rating%20to%20Ca%20from%20Caa1.) for a number of reasons. They have renegotiated the terms of their bank debt with bank lenders, most likely to avoid a covenant breach and default, and to get more time to turn the business around. Banks probably accepted this restructuring to avoid a liquidation, but may not be able to increase their exposure (i.e. lend more cash). The company is therefore not sure they'll be able to repay or refinance the Notes due 2024 (which you're holding), and took the initiative to negotiate with the largest institutional noteholders for an exchange (on substantially the same terms they're offering to you now) in 2022. Over 80% of the noteholders (large institutions) have accepted these terms (probably because the alternative was insolvency and a loss). PIK means that your interest/coupon on the new notes will not be paid in cash (because they're kind of strapped for cash right now). Instead, they intend to pay you the compounded interest in cash only at maturity in 2026. However, PIK Toggle means they may try to pay cash interest/coupon if they can, but most likely at their discretion. You've also missed the March 5th early bird deadline for the early participation premium of $50 (meaning you'll only get $950 per $1,000 of notes). We can't advise you on the best course of action now. What is clear, however, is that if you don't accept the exchange, you'll be one of the stragglers (part of a subset of the remaining 20% of noteholders that still don't accept the exchange). And it's unclear whether the company will be in a position to repay you at par next year. You may have to take a loss on your principal. Then again, you bought those bonds at $74 cents. The company could repay anywhere between $0 and $100. On that point, I'm sorry I don't have a view. Are you ok to take that risk, or would you rather take the chance (like the 80% noteholders and the banks) that the company can turnaround? In which case you'd be rewarded with an 8.5-12.5% compounded return (on $95 cents). Or would you rather take your chances that they're able to repay $74-100 next year?

marsap888

They offer you to exchange 1000 par value of existing note, to 950 par value of new PIK note and 50 warrant to buy shares of this company at price $1,25. New PIK note could pay coupons on regular basis 8,5% or at maturity 12,5%. The issuer definitely has financial problems

VisualMod

Hey /u/FactsAndTrendTrade - I am a bot from /r/wallstreetbets. You submitted one or more banned tickers: PIK. We don't allow discussion of low market cap (less than 500mm) tickers to prevent pump & dump spam and scammers.

FamousBakerMaker

I have certain theories and experiments pertaining to the true reason squeezes happen (aside from random news that triggers very few squeezes) and most often than not, the theory goes beyond news since i am able to tell the movement before news. The timing is in the air, i try to aim for the ones within a 2 weeks time frame. If i gave it away everyone would use the method. There is a way to filter stocks i call THE GRAIL to tell which ones will just perform well in general like CVNA and 1100 others that will just go up. MSGM was apart of said list and it was apart of the squeeze list i have. (there is no limit to how high these can go i just know when the low price is in to buy it ( perfecting the timing is what the goal is as PIK BBAI and AMAM are apart of my observations. TIRX and Hoth are similar to MLGO and MSGM based on my research. Not financial advise or prediction just opinion

DooDooDuterte

I sold PIK for a loss this morning, then it hit my original price target… Gotta learn to trust my trading plan…

DooDooDuterte

I fucking sold my shares of PIK because it had low volume this morning, and it jumped to my price target. This is why you stick to your master trading plan. 🤡

DooDooDuterte

$FUV $NRBO $PIK $WiSA $GOEV $XELA for those searching by ticker. I withhold judgement any of these tickers—I literally have a brain injury (ask the guy I gave a year-old article to about COMS thinking it was from this weekend).

dbrustocker

PIK just blew up any news went from .7 to 1.1 in minutes

addieeest

Tuem or PIK