Equity and PIK notes: Difference between pages

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1.
Debt instruments based on non-cash payment of interest coupons.


''Law''
Interest is usually recognised by an increase in the amount of principal owed by the borrower.


A legal system that resolves disputes between persons by resort to principles of fairness and justness.


PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.


2.
This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.  


The capital of a firm invested by those accepting the greatest degree of risk, for example the holders of ordinary shares (also known as common stock or common equity) in a company.
In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.
 
 
3.
 
Securities representing the rights of the risk capital investors in 2. above.
 
 
4.
 
''Financial reporting''
 
Amounts in the financial report of a company representing the book value of the interests of the shareholders in 2. above.
 
It includes share capital, cumulative retained profits, and other reserves.
 
It is also known as 'total equity' or 'shareholders' funds'.
 
 
5.
 
The net value of an asset, after deducting any debt relating to it or secured on it.




== See also ==
== See also ==
* [[An introduction to equity capital]]
* [[Coupon]]
* [[Blue chip]]
* [[Equity]]
* [[Book value]]
* [[Interest]]
* [[Capital employed]]
* [[Notes]]
* [[Capital structure]]
* [[Payment in kind]]
* [[Common equity]]
* [[Principal]]
* [[Common law]]
* [[Secured debt]]
* [[Common stock]]
* [[Subordinated debt]]
* [[Compound instrument]]
* [[Unsecured debt]]
* [[Debt]]
* [[Debt for equity swap]]
* [[Dividend growth model]]
* [[Entity]]
* [[Equity cost of capital]]
* [[Equity instrument]]
* [[Equity investments]]
* [[Equity structured deposit]]
* [[Equity swap]]
* [[Kay Review]]
* [[Liabilities and equity]]
* [[Market/book ratio]]
* [[MCT]]
* [[Mezzanine]]
* [[Ordinary shares]]
* [[Own funds]]
* [[Private equity]]
* [[Reserves]]
* [[Return on equity]]
* [[Share]]
* [[Share capital]]
* [[Shareholders’ funds]]
* [[Statement of changes in equity]]
* [[Stock]]
* [[Total Loss Absorbing Capacity]]
* [[Total return swap]]
 
[[Category:Corporate_finance]]
[[Category:Compliance_and_audit]]

Revision as of 14:21, 22 August 2017

Debt instruments based on non-cash payment of interest coupons.

Interest is usually recognised by an increase in the amount of principal owed by the borrower.


PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.

This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.

In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.


See also

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