May 25 (Reuters) - HSBC Holdings HSBA.L will issue $2
billion of bonds that would convert into shares if the bank's
capital strength falls below a certain level, it said on
Wednesday.
HSBC said the so-called contingent convertible bonds, or
"CoCos", would pay an annual interest of 6.875 percent. The
bonds will convert into shares if HSBC's core equity Tier 1
capital ratio falls below 7 percent.
Bonds that convert into shares or are cancelled when a
bank's capital falls below a certain level are increasingly
being sold by banks to improve their capital cushion in case
they run into trouble.
Regulators want banks to sell the bonds to provide a bigger
cushion to prevent the need for taxpayer bailouts that were seen
in the 2007/09 financial crisis.