Toggle Note

AAA

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.

INVESTOPEDIA EXPLAINS 'Toggle Note'

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.

RELATED TERMS
  1. Deferred Interest

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

    1. A revenue or expense stream that changes a cash account over ...
  3. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  4. Interest

    1. The charge for the privilege of borrowing money, typically ...
  5. Payment-In-Kind - PIK

    1. The use of a good or service as payment instead of cash. 2. ...
  6. Payment-In-Kind Bonds

    A type of bond that pays interest in additional bonds rather ...
Related Articles
  1. Will Corporate Debt Drag Your Stock ...
    Investing Basics

    Will Corporate Debt Drag Your Stock ...

  2. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  3. How Bond Market Pricing Works
    Bonds & Fixed Income

    How Bond Market Pricing Works

  4. The Bond Market: A Look Back
    Mutual Funds & ETFs

    The Bond Market: A Look Back

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center