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When reading a company balance sheet, there is a section on Preferred Securities Outside Stock Equity under the Non Current Liabilities section.

What is Preferred Securities Outside Stock Equity?

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Preferred "stock" can be classified as either debt or equity depending on the terms of the securities. If the stock behaves more like as a bond, for example if it is redeemable for a fixed amount on a fixed date (like a bond) or if it is "putable", meaning it can be redeemed by the holder at a fixed price, then it may be more classified as "debt" rather then "equity" since the company may be responsible for redeeming it regardless of the performance of the company.

Without knowing the specific characteristics of the preferred debt you're looking at, it's hard to know exactly why they're accounted for as debt, but those are some general reasons.

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  • Thanks for the explanation. I appreciate the part where you explain how debt and equity differ. I've posted a link in reply to your comment above which I hope will help you know exactly what they mean by the Preferred Securities Outside Stock Equity phrase Jan 13 at 12:30
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    Looking at their last quarterly report, they were convertible preferred shares that were converted to common stock (equity) when they went public. Note that if you look at the quarterly balance statements those are gone from the liabilities section.
    – D Stanley
    Jan 13 at 14:19

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