MIPS is structured in such a way as to make payments on the security an interest expense for the borrower and dividend for the lender. A special purpose entity of the issuer sells the preferred stock to the public and then lends the proceeds to the parent. The parent's interest payments to the subsidiary are tax-deductible as interest and are used by the SPE to pay preferred dividends to the investors.[3] However, the interest income received by the SPE is not taxable income, because it is organized as a tax-free entity.
Because of these features, MIPS at one point dominated the market for traditional perpetual preferred equity, accounting for over 70% of all new preferred issues.[4] However, MIPS as a tax shelter no longer works. The credit rating agencies consider MIPS to be preferred stock.
ReferencesEdit
^. 5 March 2016. Archived from the original on 5 March 2016. Retrieved 13 February 2019.
^"FindArticles.com - CBSi". Findarticles.com. Retrieved 13 February 2019.
^Kenton, Will. "Monthly Income Preferred Securities - MIPS". Investopedia.com. Retrieved 13 February 2019.
^Irvine, Paul; Rosenfeld, James (2000). "Raising Capital Using Monthly Income Preferred Stock: Market Reaction and Implications for Capital Structure Theory". Financial Management. 29 (2): 5–20. CiteSeerX10.1.1.202.7889. doi:10.2307/3666282. JSTOR 3666282.
External linksEdit
Popular, Inc. - Noncumulative Monthly Income Preferred Stock 2003 Series A
October 19, 2023
monthly, income, preferred, stock, mips, hybrid, security, created, jacobson, sullivan, cromwell, partner, introduced, market, goldman, sachs, 1993, essence, mips, combination, deeply, subordinated, debt, preferred, stock, mips, structured, such, make, payment. Monthly income preferred stock or MIPS is a hybrid security created by Eli Jacobson 1 a Sullivan amp Cromwell tax partner and introduced to the market by Goldman Sachs in 1993 2 In essence MIPS is a combination of deeply subordinated debt and preferred stock MIPS is structured in such a way as to make payments on the security an interest expense for the borrower and dividend for the lender A special purpose entity of the issuer sells the preferred stock to the public and then lends the proceeds to the parent The parent s interest payments to the subsidiary are tax deductible as interest and are used by the SPE to pay preferred dividends to the investors 3 However the interest income received by the SPE is not taxable income because it is organized as a tax free entity Because of these features MIPS at one point dominated the market for traditional perpetual preferred equity accounting for over 70 of all new preferred issues 4 However MIPS as a tax shelter no longer works The credit rating agencies consider MIPS to be preferred stock References Edit Eliyahu D Jacobson 5 March 2016 Archived from the original on 5 March 2016 Retrieved 13 February 2019 FindArticles com CBSi Findarticles com Retrieved 13 February 2019 Kenton Will Monthly Income Preferred Securities MIPS Investopedia com Retrieved 13 February 2019 Irvine Paul Rosenfeld James 2000 Raising Capital Using Monthly Income Preferred Stock Market Reaction and Implications for Capital Structure Theory Financial Management 29 2 5 20 CiteSeerX 10 1 1 202 7889 doi 10 2307 3666282 JSTOR 3666282 External links EditRealty Income Declares Monthly Income Preferred Stock Dividends Popular Inc Noncumulative Monthly Income Preferred Stock 2003 Series A Traditional And Synthetic Preferreds Provide More Choices For Individual Investor Retrieved from https en wikipedia org w index php title Monthly income preferred stock amp oldid 1032108039, wikipedia, wiki, book, books, library,
