PIK Toggle Dominates Conference Discussion on Private Credit Distress; Lenders Take Keys on Amann Girrbach, Anthesis

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“Some lawyer at some point made up this concept, and it seems to have embedded itself. It’s actually very rarely utilized,” said Stuart Mathieson of Barings, talking about PIK toggle on a panel at IPEM in September. He acknowledged that PIK toggles show up in the vast majority of European deals, but said borrowers almost never pull the lever, because in most cases doing so doesn’t help the internal rate of return and is too expensive relative to the liquidity it actually frees up.

However, data from Lincoln International’s European Private Market Index does show that usage is increasing. PIK usage rose to 16.7% in the second quarter, up from 16.1% in the first quarter, and “bad PIK,” that is used to paper over underperformance rather than support growth, ticked up from 7.9% to 8.1%.

Despite this, direct lenders feel their portfolios are in good shape. One large global direct lender told Octus that average interest coverage ratios across their portfolio are still close to 3 and utilized PIK toggles still in single-digit percentages.

That said, it has become a more contentious point on new deals, with some lenders now pushing for more restrictions around when PIK toggles can be utilized, for how long and what percentage of the coupon can be PIKed.

Another contentious issue in private credit covenants has been the ability for sponsors to take intellectual property out of businesses. “We’ve seen it in some documents for upper mid market issuers and above where the sponsor has the ability to take the intellectual property via a carve out and leave the lenders with the business without the most valuable part,” said one lender speaking on a panel at a private industry event in September.

Tom Maughan, head of Bain Capital’s European private credit group, located the current wave of stress squarely in vintage, not structure. “The watchlist number of names has been pretty consistent over the past three or four years,” he said, tying it to “2021 vintage transactions that went through COVID,” where equity support and covenant relief bought time that hasn’t always translated into a fixed balance sheet. He also does not see it as systemic, “It’s idiosyncratic. It’s not one theme.”

This thesis is mostly borne out by new additions to the tracker this quarter.

Updates to the tracker this quarter include:

Creditors Barings and Eurazeo are set to crystallize significant losses on more than €300 million of private debt extended to French translation software group Acolad, after London-listed language solutions provider RWS said it will purchase its parent company Acogroup in August. RWS said on Aug. 3 that its wholly owned subsidiary signed a binding agreement to acquire Acogroup for £40.2 million, including about £17.8 million of cash held by the target, amounting to an enterprise value of £22.4 million or about 2x adjusted EBITDA of £11 million in the RWS financial year to Sept. 30, 2027.

Senior bank lenders to Austrian dental equipment manufacturer Amann Girrbach have taken the keys of the company from sponsors Capvis and Partners Group. The lender takeover came after the sponsors wrote down the equity value of the group to €1 at the end of 2025, according to the holding company’s Luxembourg reports. Prior to the restructuring, the company had outstanding debt of about €180 million, comprising €125 million senior debt, a €15 million partially drawn RCF and a €40 million second lien provided by Benefit Street Partners, or BSP. The senior and second lien debt package had been arranged in 2018 to support Capvis and Partners Group’s buyout of the group. Last year, Amann Girrbach’s holding company bought back the €40 million second lien loan from BSP for €5 million, or 12.5% of its value, before converting it into an equity claim, according to the Luxembourg accounts.

Bridgepoint Credit became the majority owner of U.K. sustainability consulting group Anthesis on July 29. Previous owner Carlyle took out a £60 million term loan facility and a £40 million acquisition facility from Bridgepoint, as well as a £21 million RCF from HSBC.

French family-controlled supply chain and logistics company Groupe BBL is seeking new financial partners and pursuing a debt refinancing as it looks to deleverage and right-size its debt stack, its 2025 annual meeting report from July, filed alongside its annual accounts on Sept. 16, showed.

Tikehau-backed French express transport and logistics provider Groupe Sterne has entered into discussions with lenders to renegotiate the terms of its financing after booking sizable impairments, according to its 2025 financial statements filed on Sept. 20. According to the accounts, Sterne’s holding company had a €182 million syndicated private loan put in place at the time of Tikehau’s leveraged buyout of the company in late 2021. Arkea Capital participated on the debt side of the transaction, according to its website. CIC Private Debt also disclosed that it invested in Sterne in 2022. On top of the buyout financing, the group’s capital structure includes an outstanding €28 million convertible bond issue at Sterne’s TopCo level, with nearly €13.9 million in capitalized interest maturing in 2029.

U.S. strategic InMusic completed its acquisition of German music technology company Native Instruments, which came out of administration on July 1. Bain Capital, Bridgepoint and Invesco had previously provided more than €250 million of private loans to the business under Francisco Partners’ ownership.

Tapi Group’s creditors are reviewing three proposals that the Italian bottle-cap maker received to overhaul its cap stack and provide it with fresh funds. A standstill agreed over the summer is set to expire at the end of October, setting a deadline for parties to reach a deal. One of the proposals comes from Tikehau to take over the business. The lender controls about half of Tapi’s roughly €146 million bank debt after buying it at discount in the secondary market, and is also an equityholder, following a share pledge enforcement on €35 million mezzanine debt it provided to a Luxembourg vehicle sitting above Tapi’s Italian holding company.

Disclosure: Funds associated with Permira hold a majority interest in the parent company of Octus.