PIK structures could mask borrower stress, finds new study

A recent study by Occorian reveals that private equity managers are using payment-in-kind (PIK) structures to relieve pressure on companies they invest in. However, these complex financial arrangements could hide underlying borrower stress and lead to operational and transparency risks due to inadequate modeling systems. This trend underscores a potential gap in risk management, which could have significant implications for both investors and the broader financial market. The findings highlight the need for improved systems to better understand and mitigate these risks.