HSBC to issue $2.25 bln of convertible bonds

LONDON, March 24 (Reuters) - HSBC Holdings (HKSE: 0005.HK - news) will issue $2.25 billion of bonds that would convert into shares if the bank's capital strength falls below a certain level, it said on Tuesday.

HSBC said the so-called contingent convertible bonds, or "CoCos", would pay annual interest of 6.375 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 if 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.

HSBC issued its first of the convertible bonds in September.

(Reporting by Steve Slater; Editing by Mark Potter)