tim and credit crisis, page-12

My understanding is that Hybrid securities are held under the Equity side of the balance sheet not Liabilities and are excluded from all net debt and gearing calculations. Rightly or wrongly because they ultimately don't have to be paid back in cash they are not debt. If they are redeemed for cash they will reduce assets/increase debt on the balance to match thier removal from the Equity part of the balance sheet. No matter which way you cut it the gearing ratio will rise if Hybrids are redeemed for cash. If they are redeemed for shares the Balance sheet doesn't alter.

cheers