What is puttable preferred stock?
The closed-end fund industry is trying to issue a new type of preferred stock, puttable preferred stock, on a broad basis. To date, there have been four successful offerings by one fund group. Industry participants are developing puttable preferred stock to permit redemption of auction market preferred stock while maintaining leverage for the benefit of common shareholders. This new type of preferred stock alternatively has been referred to as Liquidity Protected Preferred Shares (LPP), Variable Rate Demand Preferred (VRDP), or Liquidity Enhanced Adjustable Rate Securities (LEARS). These instruments are similar, but not identical, to each other. Below is a general discussion of some of their common characteristics.
