Indebted companies with limited cash are using the artifice called Payment In-Kind, or simply PIK, to settle their debts. Such is the report of Standard and Poor’s news service LCD, in November, based on an analysis of quarterly reports from major companies. Instead of paying back their loans with cash, companies issued or plan to issue additional debt obligations to distribute to their creditors. At least 47 operations of this type were recently announced, totaling US$ 33.4 billion in obligations maturing by 2018. Within this group, the number of companies controlled by private equity managers stands out. Altogether, 18 received venture capital in recent years, according to the publication Financial Week.

The explanation has to do with the worldwide lack of liquidity. Concerned with preserving the cash of the companies in which they have invested, private equity managers extend obligation maturities, hoping for a future improvement in economic conditions. Thus, they keep from compromising cash flow, which is vital to companies, especially at times of crisis.

This kind of operation was implemented by the hospital chain HCA, acquired in 2006 by a fund pool for US$ 33 billion. Net profit fell from US$ 300 million to US$ 86 million from the second to the third quarter 2008 — a risky result for a company with debts amounting to US$ 27 billion. The solution they found was to roll over US$ 1.5 billion out of that total. According to the hospital chain’s calculations, the operation will keep US$ 145 million in the company’s cash stores. When it comes to health, especially financial health, they know what they’re talking about.