An example of a mandatory corporate action for a PIK bond that pays in cash follows. That is, you specify a cash rate but you do not specify a baby bond rate. See the following figure.
To add a Mandatory PIK Bond Announcement paying in CASH:
- Account PIKDEMO owns 1,000,000.00 of ITSA Limited.
- On 20031220, ITSA Limited pays a full coupon based on a 12% Coupon Rate.
In this example, Eagle Accounting creates a Receivable for the full coupon period (60,000.00 USD) when the PIK BOND corporate action is run on 20031219.
Cash Payment = (Cash Rate / Coupon Rate) * Total Coupon Due as of Coupon Date
The Ex-Date of a PIK corporate action must be equal to the Coupon Payment Date. Also, when an issuer decides to pay fully in cash, then the PIK corporate action must be Mandatory.
0 Comments