A payment-in-kind (PIK) loan is a specialized instrument with no interest nor principal payments until maturity.
The most common PIK loan structure, which is supported by Fairways Debt, is composed of PIK interest payments and periodic interest payments.
In Fairways Debt, PIK loans are therefore configured with two different interest flows:
- Cash-pay interest, paid periodically according to the schedule
- PIK interest, capitalized and paid at the maturity of the loan
Navigate to the Debt & Derivatives Application
- Log in to your Fairways Debt account.
- Select a customer account.
- Navigate to Applications > Debt & Derivatives.
Create a PIK Loan
- Click Add Transaction > Loan > Standard Loan.
- Complete the form with all relevant details.
Note: Fields marked with an asterisk * are mandatory.
| Field | Description |
|---|---|
| Reference Code |
Unique reference of the transaction. Identifies the transaction in the portfolio. Note: The reference must be unique among all the entities managed in the account. |
| External Reference Code | Used by external systems to identify the transaction. Used when transactions are imported from or exported to another system. |
| Principal | Principal amount of the loan. |
| Currency | Currency of the principal amount. |
| Borrower | Borrowing entity in the system. Only entities in the current organization can be managed by the current user. |
| Lender | Can be either internal (an entity in the system) or external (a commercial bank). |
| Field | Description |
|---|---|
| Trade Date | Date at which the transaction has been traded. From that date, the system takes the transaction into account as an item of the portfolio. |
| Start Date | Unadjusted start date of the transaction. |
| End Date | Unadjusted end date of the transaction. |
| First Roll Date | Unadjusted date of the first payment (useful when the first period is a long or short stub). |
| Field | Description |
|---|---|
| Drawings |
Indicates if the loan includes drawings and amortization. Notes:
|
| Consolidation Start Date |
Note: This field is only available for drawings with amortization. Indicates the date at which amortization can start. |
| Field | Description |
|---|---|
| Index |
Name of the index used to calculate the rate value, e.g. FIXED for a fixed rate. Note: The field beside displays depending on the index selected. |
| Interest Rate |
Fixed rate value in percentage. Note: This field displays depending on the index selected. |
| Initial Interest Rate |
Initial rate of the custom index. Note: This field displays depending on the index selected. |
| Spread |
Spread (or margin) value in percentage. Note: This field displays depending on the index selected. |
| Day Count Convention | Used to compute the day fraction of an interest accrual period. |
| Field | Description |
|---|---|
| PIK Index |
Name of the index used to calculate the PIK rate value, e.g. FIXED for a fixed rate. Note: The field beside displays depending on the index selected. |
| PIK Interest Rate |
PIK fixed rate value in percentage. Note: This field displays depending on the index selected. |
| Initial PIK Interest Rate |
Initial PIK rate of the custom index. Note: This field displays depending on the index selected. |
| PIK Spread |
PIK spread (or margin) value in percentage. Note: This field displays depending on the index selected. |
| PIK Day Count Convention | Used to compute the day fraction of an interest accrual period. |
| Field | Description |
|---|---|
| Frequency | Frequency of the payments. |
| Interest Calculation Adjustment | Adjustment mode for the interest calculation. The nominal start and end dates of the accrual period will be adjusted accordingly before computing the interest amount. |
| Payment Date Adjustment | Adjustment mode for the payment date. |
| Last Stub Period | Defines whether the last period should be a short or long stub when it does not match the selected frequency. Short End Stub by default. |
Enter the required custom attributes, if any.
- Enable Show Details after Validation to automatically open the new PIK loan profile once created.
- Click Apply to create the PIK loan.
The new PIK loan displays in the draft portfolio.
Adjustment
Adjustment modes define how the system rolls dates in case of holidays in the calendar.
| Field | Description |
|---|---|
| Unadjusted | Not rolled. |
| Preceding | Rolled to the previous business day. |
| Following | Rolled to the next business day. |
| Modified Preceding | Rolled to the previous business day, only if that day occurs in the same month. Otherwise, rolled to the next business day. |
| Modified Following | Rolled to the next business day, only if that day occurs in the same month. Otherwise, rolled to the previous business day. |
| End of Month (unadjusted) | Rolled to the last day of the month. |
| End of Month (preceding) | Rolled to the last day of the month, then adjusted to the previous business day. |
| Modified Following (year) | Rolled to the next business day, only if that day occurs in the same year. Otherwise, rolled to the previous business day. |