Share of BDC debt paying interest in kind (PIK)

## What this measures

The share of business development companies' debt, by cost, on which some interest is paid in kind: added to the loan instead of paid in cash.

## Why it matters

PIK lets a borrower short of cash keep current. Some is negotiated at the start, but a rising share often means borrowers who cannot pay cash interest.

## How it is made

Palanor reads every BDC 10-K and 10-Q in the SEC's BDC data sets (inline XBRL, periods from August 2022) and turns the tagged schedule of investments into one row per holding: borrower, holding type, lien, base rate, spread, PIK rate, maturity, principal, cost, fair value. Some filers also tag subtotals on the same rows, so rows are pruned in steps and a filing counts only when its rows add up to between 85% and 120% of the total investments it reports. Amended filings replace the original. A quarter is the calendar quarter the balance-sheet date falls in, and it publishes once at least 60 BDCs pass the check and 80 days have passed since it ended. Debt is every loan and bond with a positive cost: first lien, unitranche, second lien, subordinated and unsecured. Equity, warrants, structured products (CLO and ABS tranches), fund and joint-venture interests and cash are left out. A loan pays in kind when it carries a tagged PIK rate above zero (InvestmentInterestRatePaidInKind).

## How to read it

Higher means more of the book is deferring interest. The series starts in Q1 2023 at 12.10%. The reading for Q2 2026 is 11.76%, from 157 BDCs. Over the series the high is 14.56% (Q1 2024) and the low 11.76% (Q2 2026).

## What it does not say

The panel changes as BDCs start and stop filing, and as new funds launch, so a move can come from who is in it as well as from credit. Marks are each lender's own fair values, set by its valuation process each quarter; they move with market spreads as well as with the borrowers. Holdings a BDC owns through a joint venture are counted where the BDC tags them on its own schedule. It does not separate PIK agreed at the start from PIK added in a restructuring, and lenders that do not tag a PIK rate are counted as no PIK.

## Source

Palanor calculation from SEC filings: the SEC Business Development Company (BDC) data sets and each filing's XBRL on EDGAR (U.S. Securities and Exchange Commission; public domain).