HSBC Bank Canada plans to issue up to $250 million of preferred shares, the bank said Monday.

The bank has entered into an agreement with a syndicate of underwriters led by HSBC Securities (Canada) Inc. and Scotia Capital Inc. to issue 7 million Non-Cumulative 5-Year Rate Reset Class 1 Preferred Shares Series E at a price of $25 per share, for gross proceeds of $175 million.

The offering will be underwritten on a bought deal basis.

HSBC Bank Canada has also granted the underwriters the option, exercisable in whole or in part at any time up to two business days prior to closing, to purchase up to an additional 3 million Preferred Shares Series E at the issue price. Should the underwriters’ option be fully exercised, the total gross proceeds of the financing will be $250 million.

The Preferred Shares Series E will entitle the holders to receive non-cumulative preferential fixed quarterly dividends of 41.25ยข per Preferred Share Series E share, to yield 6.6% annually for the initial period ending June 30, 2014. Thereafter, the dividend rate will reset every five years at a rate equal to 4.85% over the then five-year Government of Canada Bond Yield. Subject to regulatory approval, on 30 June 2014, and on 30 June every five years thereafter, the bank may redeem the Preferred Shares Series E in whole or in part at par.

Holders of the Preferred Shares Series E will, subject to certain conditions, have the right to convert all, or any part of, their shares into Non-Cumulative 5-Year Rate Reset Class 1 Preferred Shares Series F (the “Preferred Shares Series F”) on June 30, 2014, and on June 30 every five years thereafter. Holders of the Preferred Shares Series F will be entitled to receive non-cumulative preferential floating rate quarterly dividends equal to the then three-month Government of Canada Treasury bill yield plus 4.85%.

The transaction is subject to regulatory approval and is expected to close on or about March 31. The net proceeds from the offering will be used for general corporate purposes and are expected to qualify as Tier 1 Capital of HSBC Bank Canada.

IE