By converting debt to preferred shares , this helps the balance sheet and makes the company more attractive to new investors. Debt to equity is a common metric in how to look at a company’s health.
Additionally the debt payments are take off the table near term and remove the repetitive payment schedule.
“Why Corporations Supply Preference Shares Companies that offer preferred shares instead of issuing bonds can accomplish a lower debt-to-equity ratio. That allows them to gain significantly more future financing from new investors. A company's debt-to-equity ratio is one of the most common metrics used to analyze the financial stability of a business. The lower this number is, the more attractive the company looks to investors. Additionally, bond issues can be a red flag for potential buyers. The strict schedule of repayments for debt obligations must be maintained, regardless of the company's financial circumstances. Preferred stocks do not follow the same guidelines of debt repayment because they are equity issues.
Corporations also might value preference shares for their call feature. Most, but not all, preferred stock is callable. After a set date, the issuer can call the shares at par value to avoid significant interest rate risk or opportunity cost.”
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