Equity-only redemption provisions - obstacle or opportunity?

During recent years, many companies have issued redeemable preferred stock as part of their efforts to raise capital. Redeemable preferred stock offers to investors a preferred dividend and to issuers a security that can be bought back if interest rates fall after issuance. The first step in determining the availability of sale proceeds of other capital stock is to determine the meaning of "other capital stock." The identification of sale proceeds is more difficult. Unless the terms of the redeemable preferred stock provide that only the cash consideration from the sale of other capital stock may be used to redeem the shares, there is no reason to exclude the value of noncash consideration in calculating the proceeds from the sale of other capital stock. Possibly, some of the cash or non-cash consideration received by the issuer in exchange for other capital stock will no longer belong to the company or even exist at the time the shares are redeemed.