Leveraged Finance & Credit
If a $100mm note PIKs at 10% for 3 years then is repaid, what is the balance at repayment, and how does this affect leverage versus cash-pay debt?
Model answer
It compounds: $100mm x 1.10^3 = $133.1mm at the end of year 3. Because PIK interest accrues onto principal, the debt balance — and therefore total leverage — grows every period even if the business…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from Leveraged Finance & Credit
- Rank a standard LBO capital structure from cheapest to most expensive cost of capital, and explain why the ordering holds.
- A sponsor buys a company at 6.0x EBITDA of $200mm ($1.2bn EV). They want 4.0x total leverage. Sketch a plausible debt stack by tranche and the equity check.
- Why would a deal include both a TLB and senior notes rather than just maxing out the term loan?
- What does 'pro-rata' vs. 'institutional' tranche mean in a leveraged loan package?
- Explain the typical amortization profile of a TLB and what a '1% amort with bullet' means for the lender.
- What is an excess cash flow (ECF) sweep, and how does the sweep percentage typically step down?