1. HSBC to issue $2 bn of convertible bonds

HSBC to issue $2 bn of convertible bonds

HSBC Holdings 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.

By: | Published: May 25, 2016 1:58 PM
HSBC India, HSBC bank, HSBC monetary policy, GST Bill HSBC said the so-called contingent convertible bonds, or “CoCos”, would pay an annual interest of 6.875 percent. (Reuters)

HSBC Holdings 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.

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