By Vincent J. Calcagno, Head of U.S. Growth, Ocorian
New proprietary Ocorian research among North American private capital professionals points to a market preparing for wider payment-in-kind (PIK) usage.
Why PIK is rising in private credit, and why it matters
A wave of 2021–2022 vintage private credit deals are now reaching refinancing, and the market is finding out at scale what happens when borrowers can no longer comfortably service cash interest. Increasingly, the answer is PIK. According to Ocorian’s research:
96% expect PIK prevalence to increase over the next two years
90% believe growing PIK usage risks masking underlying borrower stress
Just 17% say they have robust automated systems fully accounting for PIK in waterfall modeling
- 39% still rely on significant manual processes
Payment-in-kind (PIK) structures remain a legitimate financing tool across significant parts of the market. In venture and early stage private equity lending, where PIK is built into the original agreement and priced accordingly, the structure functions as intended.
The more pressing concern is what does it mean when PIK wasn’t part of the initial plan: loans originated on a cash-pay basis that have migrated to PIK mid-stream, often under pressure, with the operational and valuation machinery struggling to keep pace.
Download the PIK Flash Report
The full report, including Vincent J. Calcagno’s analysis and the survey charts. Free PDF.
