Preferred Shares
Private Credit glossary · Portfolio Management, Monitoring & Workouts
Definition
Equity with preferential rights to dividends and/or liquidation proceeds.
Preferred Shares in plain English
Owning part of a company means owning 'shares.' Preferred shares are a special class that gets to go FIRST — first in line for dividends (the profit payouts) and first to be paid back if the company is sold or shut down and its assets are divided up. Picture boarding a plane: preferred shareholders hold priority passes and board before the regular ('common') shareholders, so if there's limited room (money), they're seated first. In exchange for that safety, they usually give up some of the unlimited upside and voting power that common shareholders enjoy.
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