WonTabro retweeted
“PIK” stands for “payment in kind”. It occurs when a borrower cannot make an interest payment and the lender wants to deny the loan has gone bad. The lender thereby lends more to a proven deadbeat, at the same interest rate of pre-deadbeat status.
Whoopsie!
WonTabro retweeted
“PIK magic”: borrower cannot make interest payment. It defaults.
Lenders don’t want to admit defaults.
They book interest as paid that wasn’t.
They increase loan principal by the interest defaulted on.
They keep the loan value at par.
NAV goes up the more loans default.
Voila!
WonTabro retweeted
On Wall Street:
2005-2006: “Hey! We found a way to turn BBB ratings into AAA ratings. And pocket the difference!!”
2024-2025: “Hey! We found a way put illiquid assets into liquid funds. And pocket the difference!!”
Come home to DoubleLine.
WonTabro retweeted
Senior BIS economist @HyunSongShin has been named by South Korea’s president to run the Bank of Korea bloomberg.com/news/articles/…
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