ANZ launched a new additional tier-one capital issue, to be known as Capital Notes 2, yesterday.As with ANZ's A$1.1 billion Capital Notes 1 issue in August last year, the new issue is fully compliant with the requirements of Basel III for additional tier-one issues. Prior tier-one capital issues from ANZ have been referred to as converting preference shares, of which there are the CPS 1, CPS 2, and CPS 3 issues outstanding.ANZ is hoping to raise A$1 billion or more, and the proceeds of the issue will be used, at least in part, to redeem the CPS 1, which are scheduled to be redeemed, or, if not redeemed, convert into ANZ ordinary shares, on June 14. Given that the Capital Notes 2 will pay a coupon of 325 to 340 basis points over the 180-day bank bill rate, compared with only 250 bps over bank bills for the CPS 1, ANZ is likely to receive roll-over acceptances from most CPS 1 holders. Moreover, with A$1.08 billion of CPS 1 notes outstanding, it seems very likely that the Capital Notes 2 offer will be upsized to A$1.5 billion or even A$2 billion.NAB raised A$1.7 billion from its comparable CPS II offer in December, which pays a coupon of 325 bps over bank bills.However, as with all additional tier-one capital issues, investors should be wary of some features.In the first instance, the Capital Notes 2 are perpetual and should pay non-cumulative, fully franked coupons that are discretionary on the part of the bank.The notes are also mandatorily convertible into ANZ ordinary shares should ANZ's common equity capital fall below 5.125 per cent and should APRA decide that the bank is about to become non-viable. ANZ disclosed that its common equity capital ratio stood at 7.5 per cent on a level one basis and 7.9 per cent at level two at the end of 2013.From January 1, 2016, ANZ intends to maintain its common equity capital ratio above eight per cent, which should exceed APRA's 5.125 per cent requirement plus the additional capital conservation buffers that will be imposed from that date. The additional capital conservation buffers comply with the Basel III requirements for domestic systemically important banks.Mandatory conversion of the Capital Notes 2 in the aforementioned circumstances would almost certain to result in capital losses for note-holders.Conversion into ordinary equity would also occur upon a change-of-control event or a tax event occurring, or a failure to repurchase the notes by March 2024.A soft call date for the repurchase of the notes, in March 2022, also applies.The book build for the issue will take place next Tuesday to determine the coupon and issue size. The offer closes on March 20 (for broker firms, it closes on March 28) and deferred settlement trading on the ASX will take place from April 1.