PIK meaning

In most leveraged buy-outs, funding combines equity and debt. Deployment of proceeds varies by deal, but finance is typically directed to: buying the target business—usually by making a direct payment to the seller meeting transaction costs and expenses, including advisers’ fees, and refinancing outstanding debt A transaction may instead aim to refinance existing liabilities or return capital to the sponsor without a full exit—known as a ‘leveraged recapitalisation’—rather than acquire a target (see Practice Note: What is acquisition finance?). This Practice Note considers: how investors inject equity into the group and the forms that equity may take the range of debt options, including senior facilities, mezzanine facilities, second lien facilities, PIK or payment in kind facilities, unitranche facilities, senior secured notes and subordinated notes, and the factors that influence the choice of funding structure For an introductory overview, see Practice Note: Introductory guide to acquisition finance. For a glossary of key terms and...

This glossary sets out many of the expressions commonly used in the leveraged finance market. Words appearing in the definitions in bold are defined elsewhere in this glossary. For further banking terminology, please refer to the main Banking & Finance Glossary... Acquisition finance glossary—A Acceleration Acceleration is the formal action taken by the agent, on the instructions of the majority lenders, following an event of default, such as making a demand for early repayment of the loan. See Practice Note: Accelerating a loan for more information... Accordion feature/accordion facility An accordion, also called an incremental debt feature, is a mechanism in the facilities agreement that, provided specified conditions are satisfied (for example, pro forma compliance with a leverage test), permits those lenders under the facilities agreement who wish to do so to advance additional debt. The terms for that extra debt are typically captured in an increase notice. This accordion or incremental debt flexibility is different from structural adjustment, which usually requires the majority consent...

ARCHIVED: This Practice Note was archived and is not maintained. Leveraged finance arrangements are frequently supported by multiple funding streams. Equity and senior debt are the norm; where further funds are required, mezzanine or other junior debt (for example, second lien, payment-in-kind (PIK) or high yield notes) may be added. Mezzanine is so named because it sits behind senior debt but ahead of equity in priority. For additional detail on typical structures and financing options, see Practice Notes: Structure of a buy-out and Sources of finance. Practice Note: Introductory guide to acquisition finance provides a primer on acquisition finance, and the Glossary of acquisition finance terms and jargon defines commonly used expressions. This note offers introductory guidance on: the mezzanine facility agreement methods by which mezzanine debt can be subordinated to senior debt key intercreditor agreement points for senior and mezzanine lenders Expanded analysis of the intercreditor topics highlighted here appears in Practice Notes: Senior/mezzanine creditor intercreditor issues—document amendments...