A contingent event that, once occurred, will prompt a regulated entity to issue financial instruments that convert into a variable number of its own ordinary shares (common shares) if it breaches a minimum regulatory requirement. This event constitutes the occurrence of either of two situations, whichever earlier: 1) a regulator decides that it is necessary to write down a capital instrument (e.g., tier-1 instrument), or otherwise the issuer would become non-viable; or (2) any relevant authority decides that an injection of public capital or equivalent support is necessary, or otherwise the issuer would become non-viable.
The occurrence of a non-viability event for such an instrument, that does not have a stated maturity date but a mandatory conversion feature, will result in mandatory conversion into a variable number of the issuer’s equity instruments if the issuer breached the tier 1 capital ratio. Such instruments are issued at par, convertible to equity instruments at a value equal to the fixed par amount.
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