A preferred stock that is subject to mandatory redemption. More specifically, it contains terms requiring the issuer to recall the shares at a preset price and specified time (e.g. after three years of issuance). Conventionally, this hybrid preferred stock was classified as owners’ equity and disclosed after common stock. In fact, it introduced as a tool to beef up balance sheets by disclosing debt as equity. However, current standards require that this type of preferred stock be treated as debt rather than equity.

It is sometimes referred to as a mandatorily redeemable preferred stock.