BondOAS™ PIKs

Kalotay
Analytics
A Division of Andrew Kalotay Associates, Inc.

BondOAS™: Specifying Pay-In-Kind (PIK) Bonds

Fixed Cash Coupon and PIK Rate

Example 1: Pays 10% cash coupon, and 2.5% PIK in every period.

The bond has to be set up with a 10% coupon as for regular bonds. Then:

bond.SetPIK(2.5);

Example 2: Pays 10% cash coupon, and 2.5% PIK starting at, say, 10/1/2018

The bond has to be set up with a 10% coupon as for regular bonds. Then:

bond.SetPIK(Date(2018,10,1),2.5);

Example 3: Pays 10% cash coupon until 10/1/2018; then pays 6% cash and 4% PIK

The bond has to be set up with a 0% coupon as for regular bonds. Then:

bond.SetPIK(10,100); // 10% coupon, 100% cash, no date is equivalent to using the idate
bond.SetPIK(Date(2018,10,1),10,60) // Same 10% coupon with 60% of that (or 6%) cash and remaining 40% (4%) PIK

Example 4: Pays 5% cash and 10% PIK until 10/1/2018, then pays 9% cash and 3% PIK

The bond has to be set up with a 0% coupon as for regular bonds. Then:

bond.SetPIK(15,33.333); // 15% coupon, 33.33% (5%) cash; remaining 66.67% (10%) PIK; no date is equivalent to using the idate
bond.SetPIK(Date(2018,10,1),12,75); // New coupon 12%, 75% (9%) cash; remaining 25% (3%) PIK

Toggle PIKs

Example 5: Pays 10% cash coupon when in cash mode; 12% when in PIK mode

When in all-cash mode, bond is regular with coupon of 10 (don’t set PIK)

When in all-PIK mode, set bond coupon to 10%. Then:

bond.SetPIK (12);
bond.PIKToggleAllow(true); // required to designate toggle PIK
value.PIKToggle(true); // toggle all PIKs on – will pay-in-kind at 12%
// NOTE: Coupon at the maturity is at cash rate. Cannot be paid in kind

When user wants to mix and match cash mode and PIK mode, e.g., pays all cash except on 10/1/2018 and 10/1/2021, when bond is in PIK mode. Set bond coupon to 10%. Then:

bond.setPIK(12);
bond.PIKToggleAllow(true);
value.PIKToggle(Date(2018,10,1), true); // Only specified date is toggled to PIK
value.PIKToggle(Date(2021,10,1), true); // Only specified date is toggled to PIK