Wall Street Wants to Let Junk Firms Pay Interest With More Debt
- Rare leveraged loan PIKs could help bridge liquidity gap
- Options save cash today but add to tomorrow’s debt burdens
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Wall Street banks are paving the way for deals to let cash-strapped junk-rated borrowers pay their interest bills with even more debt, as the pain of higher borrowing costs starts to bite.
Investment banks including JPMorgan Chase & Co. are attempting to bring so-called payment-in-kind debt to the leveraged loan market, according to people familiar with the matter who weren’t authorized to speak publicly. The so-called PIK option would be used in amend and extend deals, which allow firms to push back the maturities on their debt to avoid refinancing in a higher interest rate environment.