Preferred stock issue that has less priority in claiming dividends and assets in liquidation than another issue of preferred stock.
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A preferred stock with a guaranteed dividend that, in the event of liquidation, ranks below another issue of preferred stock. That is, if the company issuing the second preferred stock liquidates itself, a designated issued of preferred stock must have all back dividends paid before the holders of second preferred stock receive anything. However, second preferred stock ranks above all common stock. See also: Absolute priority rule.
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