what are quarterly income preferred securities quips 
quarterly income preferred securities quips are hybrid preferred stock like securities they represent an interest in a limited partnership or company that exists solely for the purpose of issuing these preferred shares and then lending the proceeds of the sales to its parent company listed on the new york stock exchange nyse they usually have a 25 par value and cumulative quarterly distributions understanding quarterly income preferred securities quips created by goldman sachs co as a marketing tool quarterly income preferred securities quips are an example of hybrid securities aka hybrids combining the features of preferred stock and corporate bonds like bonds they are essentially subordinated debt they have maturity dates and a par value but they look like preferred stock because they represent an ownership stake in a limited company partnership are listed on a stock exchange and make payments in the form of quarterly dividends quips are issued by a special purpose foreign or domestic limited liability company llc or limited partnership lp whatever its structure or nationality this issuing entity is typically a wholly owned subsidiary of a u s corporation and it doesn t do anything like make investments or finance businesses it only exists in fact was created by the parent firm to sell shares of itself to investors the llc or lp raises funds then takes the money it receives and loans it to its parent company the parent receives the proceeds and dutifully pays interest on the borrowed funds back to the subsidiary which then uses the money to pay quarterly dividends to quips holders because the llc or lp is a partnership the full amount of the interest payments has to flow through to the quips holders but no corporate taxes are paid on them first as they would be with regular stock dividends hybrids can pay a higher rate of return than preferred stock because dividends are paid with pretax dollars and therefore they generate a sizable tax break for corporations in fact the parent company gets to deduct the interest payments it makes on the borrowed quips funds on its tax return because technically it s getting a loan from its subsidiary llc or lp while quips are listed and trade on the stock exchange they have finite lifespans like bonds quips typically have maturities of 30 50 years however in some cases the issuers can extend the maturity cycle to a longer time period for example a well known telecom provider initially issued quips that began with a 30 year maturity but then extend the maturity cycle to 49 years another quips issuer abbreviated the maturity cycle from 30 years to a five year non call period but like most hybrid securities the average maturation period is 40 years another form of hybrid securities is monthly income preferred stock or securities mips mips are similar to quips but as the name implies pay income every month special considerationsvia quips the parent company gets the cash it needs plus a tax benefit and investors get a steady dividend seems like a win win all around there s a catch however the issuing lp or llc can suspend or defer its dividends even though they are actually interest payments and not be considered in default as it would be if it missed paying interest on a bond if the issuer of quips fails to make a promised periodic payment investors have no power to force the issuer into bankruptcy but while this characteristic creates added risk for investors the quips structure benefits parent corporations because it does not raise the parent company s debt levels and therefore does not jeopardize its debt ratios 