Private Credit Lenders Let Borrowers Skip Cash Payments
Business & Finance News Today | 2 Min News | The Daily News Now! · The Daily News Now!
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Show Notes
Private credit lenders are shifting to payment in kind (PIK) loans, allowing borrowers to skip cash payments and add interest to the principal. This trend is surging amid sector stress, particularly in the software industry. Companies that took on cheap debt during the 2020-2021 boom are now grappling with AI threats, stock drops, and tight cash. Big business development companies like Ares, Apollo, and BlackRock funds are dealing with investor pullbacks, leading to capped withdrawals and tweaked deals to avoid loan write-downs. Analysts predict that over a third of private credit deals to software firms will have PIK options by 2025, with PIKs making up more than 20% of these lenders income, half from tech. If software woes persist, expect more deferrals, but a wave of tight liquidity could drastically increase PIK usage and expose hidden risks.
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