PIK bonds Mind who you PIK on

Old hands in the credit market thought the wave of pay-in-kind (PIK) bonds sold early this year would mark the absolute zenith of the bull market. They were not wrong. The price of these bonds, which pay interest not in hard cash but rather in the form of new bonds, has plummeted in the wake of General Motors’ surprise profit warning. The shock has flipped financial markets from risk loving to risk averse. New PIK issues from Eco-Bat and Ardagh have traded below 90% of their face value. Others ...