Balancing Yield and Risk: The Global Partners Preferred Stock Dilemma

The 9.5% Series B preferred stock of Global Partners LP (GLP.PR.B) offers a compelling 9.19% yield, but its May 15, 2026, call date creates a critical inflection point for investors. With its price trading at a 3.4% premium to its $25 liquidation value, the stock presents a classic trade-off between rewarding income seekers and exposing them to redemption risk. This analysis evaluates whether the high yield justifies holding through potential margin-driven valuation shifts, focusing on GLP's debt restructuring, EBITDA trends, and strategic priorities.

The Call Risk: A Premium at Risk of Erosion

The most immediate concern for holders is the May 15, 2026, call date, when GLP can redeem the preferred stock at par ($25.00). The current market price of $25.85 reflects a premium that could vanish if GLP exercises its call option. This risk is compounded by the company's improving financial health: its debt-to-equity ratio has dropped to 3.16x, and S&P now projects leverage to fall below 3.0x by year-end 2025. Such progress could incentivize GLP to refinance cheaper debt, making the preferred stock's 9.5% coupon an unnecessary expense.

Investors face a stark choice: exit before the call date to preserve the premium or hold for dividends, betting on sustained cash flows and the company's reluctance to call. The latter hinges on two factors: the likelihood of GLP retaining the preferred stock and the durability of its EBITDA recovery.

EBITDA Trends: Volatility Amid Strategic Gains

GLP's Q1 2025 EBITDA surged to $91.9 million, a 54% year-over-year jump, driven by colder winter demand for distillates and the integration of newly acquired terminals (notably from Gulf Oil and ExxonMobil). This outperformance contrasts with Q4 2024's 13% EBITDA decline, highlighting sector-specific volatility tied to weather and commodity prices. However, the recent improvement is no fluke: terminal acquisitions have expanded GLP's midstream footprint, reducing reliance on volatile retail fuel sales.

The distribution coverage ratio of 2.03x (after preferred dividends) signals ample cash flow to service the $2.375 annual preferred dividend. Yet investors must remain cautious: GLP's Q1 revenue missed estimates by $1.06 billion, suggesting execution risks in a competitive landscape. Persistent terminal growth and cost discipline will be critical to maintaining this trajectory.

Debt Restructuring: A Double-Edged Sword

GLP's $2.03 billion debt load remains daunting, but strategic refinancing has extended maturities. Its credit facilities now mature in March 2028, easing near-term pressure. The debt-to-EBITDA ratio of 3.28x, while elevated, has stabilized, and the company's liquidity (current ratio of 1.21) supports operational flexibility. Improved leverage positions GLP to pursue cheaper financing, which could lead to a preferred stock call. Conversely, if interest rates remain high, GLP might avoid calling to retain this relatively low-cost capital.

The Investment Decision: Hold or Fold?

Case for Holding

• Yield Advantage: The 9.19% yield outperforms most high-grade preferreds and compensates for the call risk if GLP delays redemption.
• Terminal Growth: Acquisitions and partnerships (e.g., RoadFlex for efficiency gains) could solidify EBITDA, supporting dividends.
• Cumulative Dividends: Missed payments must be settled before common dividends, offering a safety net.

Case for Selling

• Premium Exposure: A $0.85 loss per share (3.3% of current price) is a real risk if GLP calls in 2026.
• Rate Environment: Rising rates could force GLP to refinance at higher costs, making the preferred stock's 9.5% coupon less attractive.
• Valuation Pressure: The bid-ask spread and moderate liquidity complicate exits for large positions.

Strategic Considerations for Investors

1. Monitor Debt Metrics: Track whether GLP's leverage drops below 3.0x by 2025—a key trigger for potential calls.
2. Watch EBITDA Trends: Sustained growth in terminal-driven EBITDA could justify holding, while another quarterly stumble might accelerate a call.
3. Interest Rate Movements: A Fed pause or cuts could reduce GLP's incentive to call; rising rates increase the risk.

Final Analysis: A Wait-and-See Approach

GLP.PR.B's high yield makes it attractive for income portfolios, but the call risk demands a nuanced strategy. Conservative investors should consider selling before the 2026 deadline to lock in gains, especially if rates climb. Long-term holders must remain confident in GLP's ability to stabilize EBITDA and avoid calls, prioritizing dividends over capital appreciation.

The stock's fate hinges on two variables: whether GLP's terminals deliver consistent cash flow and whether management prioritizes balance-sheet repair over preferred stock retention. For now, the jury remains out—investors should weigh their risk tolerance and time horizon before committing.

In sum, GLP.PR.B is a high-reward, high-risk bet. While the yield is alluring, the clock is ticking toward May 2026. Proceed with eyes wide open.