What type of notes may include cash-pay notes or discount (PIK) notes?

Senior subordinated debt is the correct answer because this type of debt typically includes more flexible repayment structures that can encompass both cash-pay notes and payment-in-kind (PIK) notes. Cash-pay notes require interest payments made in cash, while PIK notes allow the issuer to defer cash interest payments by adding them to the principal amount outstanding. This flexibility makes senior subordinated debt an attractive option for borrowers that might have tighter cash flow situations but still want to maintain access to capital.

In contrast, options like senior secured debt generally prioritize lower-risk structures, reflecting direct cash obligations to mitigate investment risks for lenders. Junior subordinated debt, while theoretically able to include such features, is often more risky and thus less common in the context of cash-pay versus PIK notes. Preferred stock, while offering flexibility in how and when dividends are paid, does not fall under traditional debt categorization where cash vs. PIK distinctions are typically made. Therefore, the characteristics of senior subordinated debt align most closely with the presence of both cash-pay notes and PIK notes.