Monday, April 16, 2012

GMX Resources (GMXR) Opts to PIK Its Next Senior Secured Interest Payment

From this afternoon's 8-K:

"GMXR’s 2017 Senior Secured Notes have a semi-annual interest payment due the first day of June and December. GMXR has an option to pay the interest in cash (11.0% per annum) or a PIK election (9.0% per annum in cash and 4.0% per annum payable in the form of additional notes). GMXR has selected the PIK election for the interest payment due June 1, 2012. The record date for this interest payment is May 15, 2012. The PIK election will increase the outstanding principal balance of the 2017 Senior Secured Notes by $5.1 million."
PIK stands for "pay-in-kind"; the SSNs give them the option to pay a higher interest rate in exchange for less cash outlay. So, part of the interest payment is more debt. You can think of this as negative amortization.

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