Payment-In-Kind Bonds

See: Payment-In-Kind - PIK.

Dividends sometimes get paid this way...dividends on stocks or equities. When a bond offers PIK interest, it means that the company has the right to pay its lenders with its own shares of stock instead of cash.

The move to do that sends a strange message. It says equity is worth less than the cash interest payable on the bonds. Maybe that's ok, maybe it's not. But having the flexibility to pay debts that way is maybe...good (for the borrowers).