Santander U.K. is planning a debut sale of the riskiest bonds to replace outstanding debt as it as seeks to comply with new regulations.

The British unit of Spain’s biggest lender will meet investors between May 29 and June 2 to market bonds in pounds that will count toward its Tier 1 capital, according to a person familiar with the matter, who isn’t authorized to speak publicly and asked not to be identified. It’s offering to repurchase 510 million pounds ($780 million) of capital securities and $189 million of preference shares, according to exchange filings.

Regulators are insisting banks issue debt that absorbs losses in a crisis to protect taxpayers. Additional Tier 1 bonds are undated and have optional interest payments, ensuring capital doesn’t leave the company should the issuer get into trouble.

To persuade investors to part with the securities, Santander U.K. is offering a premium of as much as 20 percent more than face value for the notes in pounds and 35 percent for those in dollars, according to the filings.

UBS AG and Santander’s own investment bank will structure the deal and manage it with Bank of America, Barclays Plc and Morgan Stanley, the person familiar with the matter said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE