In a private equity transaction involving the acquisition of a target company, the private equity firm utilizes a debt instrument with a Pay in Kind $($PIK$)$ interest feature. How does this PIK interest arrangement specifically affect the financial structure of the deal?

A$)$PIK interest necessitates immediate cash payments, reducing the free cash flow available to the firm.

B$)$PIK interest allows the firm to defer interest payments by deducting them from the principal amount of the loan.

C$)$PIK interest leads to an increase in the debt's principal amount over time, as interest accrues and is added to the loan balance.

D$)$PIK interest is utilized to decrease the effective interest rate over the loan period, easing the financial burden.

E$)$PIK interest mandates that interest payments are made through equity shares in Company X$,$ rather than cash or debt.