Tuesday, November 19, 2013

Pay in Kind Bonds

When you think about it, buying a bond that can pay coupons in more bonds rather than cash is insane. Right at the moment (coupon default) when you would want to swoop in and preserve collateral, you've given a debtor lots of extra leash.

1 comment:

Taylor Conant said...

One way to think about this is to ask why we wouldn't want to structure all debt to pay back in more of itself. Not just some of the time, but all of the time. Why would that be a bad idea?