Private Companies Are Deferring Loan Payments at a Higher Rate. 

Detected Manipulations & Suggested Changes

Selective use of sources

Relying primarily on one institution’s data and framing without broader corroboration or countervailing expert views.

“Data from the valuation firm show that 11% of fourth-quarter borrowers paid interest in-kind… Bad PIK was in 6.4% of private loans last quarter… The firm is among the largest providers of third-party loan valuations in the private credit industry, and analyzed more than 7,000 companies during the fourth quarter.” “‘There's been a lot of debate about our PIK analysis, but it all comes down to loan-to-value,’ said Ron Kahn, global co-head of valuations and opinions at Lincoln. ‘Companies we flagged as having bad PIK went from roughly 40/60 debt-to-equity… to about 76% debt today — that's a sign of stress.’”

3 suggestions

Include data or commentary from at least one independent source (e.g., another valuation firm, rating agency, or academic study) to confirm or contrast Lincoln’s findings on PIK usage and stress.

Clarify the scope and limitations of Lincoln’s dataset (e.g., sectors, geographies, deal sizes) so readers understand how generalizable the conclusions are.

Explicitly note that the classification of 'bad PIK' is Lincoln’s own analytical framework and may not be universally accepted, and briefly mention alternative ways market participants might classify or interpret PIK structures.

Appeal to authority

Leaning on the status and expertise of a named institution or executive to support an interpretation without fully unpacking the underlying reasoning or potential caveats.

“The firm is among the largest providers of third-party loan valuations in the private credit industry…” “‘Companies we flagged as having bad PIK went from roughly 40/60 debt-to-equity… to about 76% debt today — that's a sign of stress.’” “Kort Schnabel, CEO of Ares Capital Corp., told analysts last week that there was a ‘slightly higher percentage of PIK’ on the firm's software book last quarter, but that the vast majority of it was planned.”

3 suggestions

After quoting Lincoln’s and Ares’s executives, add a brief explanation of the analytical basis for their views (e.g., historical default data at similar loan-to-value levels, or performance of portfolios with high planned PIK) rather than relying mainly on their positions and titles.

Indicate that these are interpretations or assessments by specific market participants, not definitive proof of future outcomes (e.g., 'Lincoln interprets this as a sign of stress, based on its experience valuing such loans').

Where possible, balance executive quotes with neutral, data-based context (e.g., historical default or recovery rates at comparable leverage levels) so readers can evaluate the claims independently of the speakers’ authority.

Unbalanced reporting

Presenting one analytical framing more prominently than others, even if the overall tone remains factual.

The article repeatedly emphasizes PIK as a 'sign of stress' and rising loan-to-value ratios eroding downside protection, while the strategic or neutral uses of PIK are mentioned only briefly: “An unforeseen decision to start paying in-kind can often signal mounting strain, such as a cash crunch. But sometimes, borrowers will see a sudden opportunity to spend capital and bad PIK can be used as a strategic measure.”

3 suggestions

Expand the explanation of strategic or neutral uses of PIK with at least one concrete example or scenario where PIK has been used successfully without indicating distress.

Include a short paragraph noting that the relationship between PIK usage and default or restructuring outcomes is not perfectly one-to-one, and, if available, provide any data on how often 'bad PIK' precedes actual credit events.

Clarify that while rising PIK incidence and higher loan-to-value ratios can be warning signs, they are part of a broader set of indicators that lenders and investors monitor, rather than definitive proof of imminent problems.