Payment-In-Kind - PIK

A A A

DEFINITION

1. The use of a good or service as payment instead of cash.

2. A financial instrument that pays interest or dividends to investors of bonds, notes or preferred stock with additional debt or equity instead of cash. Payment-in-kind securities are attractive to companies who would prefer not to make cash outlays. They are often used in leveraged buyouts.

INVESTOPEDIA EXPLAINS

1. A farmhand who is given "free" room and board instead of receiving an hourly wage in exchange for helping out on the farm is an example of payment-in-kind.

2. Payment-in-kind securities are a type of mezzanine financing, where they have characteristics indicative of debt and equities. They tend to pay a relatively high rate of interest but are considered risky. Investors who can afford to take above-average risks, such as private equity investors and hedge funds, are most likely to invest in payment-in-kind securities.


RELATED TERMS
  1. Barter

    The act of trading goods and services between two or more parties without the ...
  2. Time-Based Currency

    A currency whose value is based on one man-hour of labor. A time-based currency ...
  3. Payment-In-Kind Bonds

    A type of bond that pays interest in additional bonds rather than in cash. The ...
  4. Distribution In Kind

    A payment made in the form of securities or other property, rather than in cash. ...
  5. Toggle Note

    A payment-in-kind bond, where the issuer has the option to defer an interest ...
  6. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders equity. Return ...
  7. Equity Financing

    The act of raising money for company activities by selling common or preferred ...
  8. Current Dividend Preference

    A safety feature of preferred shares, whereby holders of such shares are entitled ...
  9. At A Discount

    This specifically refers to stock that is sold for less than its nominal or ...
  10. Composite Cost Of Capital

    A company's cost to borrow money given the proportional amounts of each type ...
Related Articles
  1. 5 Things To Know About Asset Allocation
    Investing Basics

    5 Things To Know About Asset Allocation

  2. IRA Contributions: Deductions and Tax ...
    Taxes

    IRA Contributions: Deductions and Tax ...

  3. The
    Options & Futures

    The "True" Cost Of Stock Options

  4. A New Approach To Equity Compensation ...
    Options & Futures

    A New Approach To Equity Compensation ...

  5. Choosing The Best Disability Insurance ...
    Options & Futures

    Choosing The Best Disability Insurance ...

  6. Introduction To SIMPLE 401(k) Plans
    Retirement

    Introduction To SIMPLE 401(k) Plans

  7. 10 Retirement-Wrecking Moves
    Mutual Funds & ETFs

    10 Retirement-Wrecking Moves

  8. Goldman, the Muppets and the Mystery ...
    Investing Basics

    Goldman, the Muppets and the Mystery ...

  9. Weighted Average Cost Of Capital (WACC)
    Investing

    Weighted Average Cost Of Capital (WACC)

  10. Guide To Embedded Options In Bonds
    Bonds & Fixed Income

    Guide To Embedded Options In Bonds

comments powered by Disqus
Hot Definitions
  1. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  2. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  3. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  4. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  5. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  6. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
Trading Center