HSBC launches US$2.5 billion AT1 bond issue in Hong Kong after market standstill

HSBC Holdings has launched a landmark $2.5 billion Additional Tier-1 (AT1) bond issue in Hong Kong, effectively reopening a crucial market for bank capital that has been frozen since late February. The sale, scheduled for March 24, represents the first major AT1 offering since the outbreak of the US and Israel war against Iran on February 28, which created significant volatility and halted new issuances across global financial markets. The bank is issuing two equal tranches: $1.25 billion in five-year bonds with a 6.75% annual coupon and another $1.25 billion in ten-year bonds at 7%. HSBC stated the net proceeds will be used for general corporate purposes and to maintain or strengthen its regulatory capital base.

This issuance is a critical test of investor appetite for higher-risk bank capital instruments following a period of geopolitical instability. AT1 bonds, formally known as perpetual subordinated contingent convertible securities, offer high yields but carry significant risk, as they can be written down or converted to equity if a bank's capital falls below certain thresholds. The successful placement of this deal, managed by a syndicate of 33 global banks including Citigroup, Morgan Stanley, and Goldman Sachs, signals a potential return of confidence in Hong Kong as a stable financial hub for capital raising. Analysts view Hong Kong's relative stability as a key factor making it the natural venue for this reopening transaction, which could pave the way for other global lenders to return to the AT1 market.