Preferred Equity (Buyout)

A class of equity in an acquisition vehicle that ranks ahead of the ordinary shares for a fixed return, usually a coupon that accrues in kind rather than being paid, redeemed from exit proceeds before the ordinary receives anything. Lenders treat it as equity because it sits below the debt and pays no cash; the ordinary holders treat it as a cost, because every year of accrual is a larger claim on the exit. Who supplies it (increasingly infrastructure and credit funds) and on what terms is often disclosed only in part.