Global Partners' Preferred Stock: Navigating Call Risk and Valuation Crossroads

Investors in Global Partners LP's 9.50% Series B preferred stock (GLP.PR.B) face a pivotal decision as the 2026 call date looms. With a redemption price of $25.00 per unit and the current market price hovering at a 3.4% premium, the interplay of debt restructuring, dividend sustainability, and valuation dynamics will determine whether these securities offer enduring value or become a source of risk.

Debt Restructuring and the 2026 Call Crossroads

Global Partners' recent extension of its credit facility maturity to March 2028 marked a strategic move to reduce near-term refinancing pressures. By pushing debt obligations further into the future, the company has bought itself breathing room to manage its $2.02 billion debt load, which carries a debt-to-equity ratio of 3.16x—a leveraged but improving position. S&P's upgraded outlook to positive, anticipating leverage below .0x by 2025, underscores progress toward a stronger balance sheet.

However, this financial flexibility also heightens the risk that Global Partners will call its Series B preferred stock starting May 15, 2026. If redeemed, holders will receive the $25.00 liquidation preference plus accrued dividends, but the current $25.85 market price—already a premium—could evaporate. The company's ability to refinance at lower rates or prioritize cheaper debt could make this an attractive move.

Dividend Sustainability: A Tightrope Walk

The Series B preferred stock's 9.50% coupon, yielding 9.19% at current prices, remains compelling. Yet, recent financials reveal vulnerabilities. Fourth-quarter 2024 adjusted EBITDA dropped 13% year-over-year to $97.8 million, and distributable cash flow fell to $46.1 million, down 22%. These declines raise questions about the company's capacity to sustain high dividend payments.

Offsetting these concerns are strategic moves like the acquisition of Motiva and Gulf Oil Corp terminals, which aim to boost volumes and reduce leverage. The RoadFlex partnership further signals a focus on operational efficiency. If these initiatives succeed, Global Partners could stabilize cash flows and maintain dividend payouts. However, investors must weigh near-term headwinds against long-term growth potential.

Valuation Dynamics: Premium at Risk, Yield vs. Liquidity

The Series B preferred stock's current premium reflects investor confidence in Global Partners' turnaround story and the allure of its high yield. Yet, this premium is inherently vulnerable to the call risk. Should the stock be redeemed at $25.00, holders would forfeit the $0.85 premium—a 3.3% loss. Meanwhile, the bid-ask spread and moderate liquidity (as seen in recent trading) add execution risks for large positions.

Comparing GLP.PR.B's yield to broader preferred markets offers perspective. While its 9.19% yield outperforms many high-grade issues, it faces competition from newer issuances with lower coupons in a rising-rate environment. Investors must decide whether the yield compensates for the call risk or if opportunity costs—such as reinvesting proceeds at higher yields elsewhere—are too high.

Strategic Implications for Investors

The 2026 call date creates a binary choice:
1. Exit Before the Call: Sell GLP.PR.B before May 15, 2026, to lock in the current premium and avoid potential losses. This strategy is prudent if investors believe Global Partners will exercise its call option, especially if market rates remain elevated or the company's leverage continues to improve.
2. Hold for Dividend Income: Maintain the position to collect the final dividend if the stock is not called. This requires confidence in Global Partners' financial health and the likelihood that the premium will persist due to sustained demand for high-yielding, cumulative preferreds.

The decision hinges on two variables:
- Company-Specific Factors: Monitor leverage reduction progress, EBITDA recovery, and the execution of terminal acquisitions. A debt-to-equity ratio below 3.0x by 2025 would bolster the case for a call.
- Market Conditions: Track interest rates and the broader preferred stock market. A steepening yield curve or a flight to safety could pressure GLP.PR.B's price, while stable rates might allow the premium to endure.

Final Considerations

Global Partners' preferred stock epitomizes the trade-off between yield and risk in today's market. While the 9.50% coupon offers attractive income, the 2026 call date introduces a critical inflection point. Investors must balance the allure of high returns against the certainty of losing the premium if redeemed. Those with a long-term horizon and confidence in Global Partners' turnaround may hold, but conservative investors should consider hedging or exiting to preserve gains.

As we approach the call date, the interplay of debt management, dividend resilience, and valuation will determine whether GLP.PR.B remains a winner—or a warning—for preferred stock investors.