PIK and Roll: Companies Seize On Perks of Loose Lending Terms

Some risky debt structures created during the leveraged-buyout boom are coming home to roost.

A number of companies that issued debt with easy terms are now making use of those options to conserve cash. That doesn't always mean the companies have serious problems, but it is creating concern for investors, who fear losing more money.

Last week costume-jewelry retailer Claire's Stores Inc. told investors it intends to pay interest on $350 million of its bonds with additional debt rather than cash. Last year Claire's, which was taken private in May 2007 by Apollo Management LP, issued some bonds with "payment-in-kind ...