These days, financing corporate buyouts by taking on staggering amounts of junk-bond debt isn't in fashion. But because billions of dollars of such debt are still on some companies' books--with junk bonds still lingering--some healthcare companies, including HCA, are resorting to a potentially risky strategy known as payment in kind (PIK) to keep the bonds afloat. PIK involves actually paying down down junk debt by taking on even more bond debt, an approach that strikes some analysts as very dicey.
According to Standard & Poor's, 47 companies have PIK bonds outstanding, worth a total of $33.4 million. These include hospital chain HCA, which is definitely weighed down by a serious debt load. The hospital company, which was brought private in a $21 billion deal in mid-2006, took on $11 billion in debt as part of the transaction. HCA, like the other companies exercising this option, say they feel PIKs are a smart move given the ongoing financial market chaos.
To learn more about PIK debt payments:
- read this Modern Healthcare article (reg. req.)
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