Where to trade with pik bonds?

[Martinghoul]

So, just for big, fat boys ...

Well, you'd be surprised how many of the "big, fat boys" wouldn't touch this stuff with a bargepole...

 

[lojze]

Do you have an interactive brokers account? If you can't find the bond, you might be able to call them and see if they can get access to it. I know they have a note on their site saying for clients with specific needs to call their bond desk as they can source specific issues.

How about Ameritrade?

 

[newwurldmn]

Well, you'd be surprised how many of the "big, fat boys" wouldn't touch this stuff with a bargepole...

I did some reading. Isn't it for all practical purposes a bond that pays its interest with more bonds (like a stock paying a stock dividend)? What makes it toxic? Seems like a version of a zero coupon bond.

 

[FCXoptions]

I believe it is just added to the principal on the bond essentially. So a 10% PIK bond/Loan on a million they would owe you $1.1m after year one then $1.21m year 2. It compounds against them essentially, but they don't have to pay you anything until maturity.

Not 100% on that, but from what I've read that is how they are typically structured.

 

[Martinghoul]

I did some reading. Isn't it for all practical purposes a bond that pays its interest with more bonds (like a stock paying a stock dividend)? What makes it toxic? Seems like a version of a zero coupon bond.

It's just that this sorta thing is normally associated with a spiral into distress. Once you PIK, you're not very likely to come back to normality. That means that there are lots of devils in details and everything is on a case-by-case basis. Needless to say, this isn't good for turnover, liquidity etc etc...

As someone put it, "First they pay, then they PIK and then they die."

 

[just21]

The Glazers bought Manchester United with PIK bonds. Turned into a good deal for them.

 

[Martinghoul]

The Glazers bought Manchester United with PIK bonds. Turned into a good deal for them.

Eventually, yes... I am not sure if all the craziness and the hatred of supporters was worth it in the end.

 

[newwurldmn]

It's just that this sorta thing is normally associated with a spiral into distress. Once you PIK, you're not very likely to come back to normality. That means that there are lots of devils in details and everything is on a case-by-case basis. Needless to say, this isn't good for turnover, liquidity etc etc...

As someone put it, "First they pay, then they PIK and then they die."

I see.

 

[donnap]

Supposedly, there are some preferred stocks out there that behave like PIK bonds.

Not my area of interest, though.