Monthly income preferred stock or MIPS is a hybrid security created by Eli Jacobson,[1] a Sullivan & Cromwell tax partner, and introduced to the market by Goldman Sachs in 1993.
[2] In essence, MIPS is a combination of deeply subordinated debt and preferred stock.
MIPS is structured in such a way as to make payments on the security an interest expense for the borrower and dividend for the lender.
A special purpose entity of the issuer sells the preferred stock to the public and then lends the proceeds to the parent.
The credit rating agencies consider MIPS to be preferred stock.