Payment in Kind
(PIK) Toggle Clause

Summary

This payment in kind (PIK) toggle clause may be used by a company in relation to payment of interest on its securities. This template includes practical guidance. This PIK interest toggle clause may provide a company with the flexibility of choosing between paying interest on its securities entirely in cash, by increasing the principal amount (PIK), or through a combination of cash and PIK interest. The company may desire this flexibility to better manage its cash flow and financial strategies. Under this clause, if the company does not make an election, the interest will be paid using the PIK payment method. For full listings of key content covering mezzanine financing, see Mezzanine Financing (Commercial Real Estate) Resource Kit and Mezzanine Finance (Non-CRE) Resource Kit. For more on payment in kind interest, see Mezzanine Lending — Subordinated Debt Plus PIK Interest, and Subordinated Debt Plus Warrants.