JPMorgan’s Oksana Aronov Sees More Junk Firms Struggling to Repay Debts

Lower-rated companies paying more interest with new debt is a sign of rising credit stress as interest rates stay high and earnings decline, according to JPMorgan Asset Management’s Oksana Aronov.

So-called payment-in-kind — an arrangement that allows companies to pay interest with principal instead of cash — has jumped to nearly 9% of high-yield bond and loan interest payable globally, from about 4% in 2020, according to the firm’s head of market strategy for alternative fixed income. Aronov says PIK is prevalent at retail companies, but also widely used in other industries, and she expects it to spread further to other sectors this year.