Toggle Note


DEFINITION of 'Toggle Note'

A payment-in-kind bond, where the issuer has the option to defer an interest payment by agreeing to pay an increased coupon in the future. With toggle notes, all deferred payments must be settled by the bond's maturity.


Toggle notes provide firms with a way to raise debt while staying afloat during times of strained cash flow. When cash is at a minimum, the firm can use the toggle to defer an interest payment.

While this seems like an attractive option for the firm, it does come at a cost. The increased interest rate provides ample incentive to not miss an interest payment.

  1. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  2. Interest

    The charge for the privilege of borrowing money, typically expressed ...
  3. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  4. Payment-In-Kind Bonds

    A type of bond that pays interest in additional bonds rather ...
  5. Payment-In-Kind - PIK

    1. The use of a good or service as payment instead of cash. 2. ...
  6. Deferred Interest

    The amount of interest that is added to the principal balance ...
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