In one sentence
An equity position with priority over common equity for returns, often used alongside or instead of mezzanine debt.
The longer version
Preferred equity sits above common equity in the capital stack, taking its return before common holders but behind all debt. It fills gaps like mezzanine debt but is structured as equity, changing the lender's intercreditor considerations.
Whether a gap is filled with mezzanine debt or preferred equity affects the senior lender's rights and the overall structure lenders diligence.
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