UPDATE 1-Scotiabank to issue C$650 mln of Tier 1 securities

* To offer C$650 mln of Tier 1 trust securities

* Offering to shore up Tier 1 capital

* Shares down 2.7 percent

TORONTO, May 7 (Reuters) - Bank of Nova Scotia (BNS.TO: Quote, Profile, Research) said on Thursday it would issue C$650 million ($551 million) of Scotiabank Tier 1 Trust Securities in a move to bolster its capital ratios and balance sheet.

The bank said the price of each Scotia BaTS III Series 2009-1 will be C$1,000 and interest will be paid semi-annually in the amount of $39.01 per security on the last day of June and December until June 30, 2019.

Scotiabank, Canada's third-largest bank, said the public offering is part of its ongoing and proactive management of its Tier 1 capital structure. A bank's Tier 1 ratio is considered a key measure of its financial strength.

Canada's banks, which have been ranked as the world's soundest as the global financial crisis ravages their international peers, have nevertheless been shoring up their balance sheets by issuing preferred and common shares.

Scotiabank said after June 30, 2019, and on every fifth anniversary thereafter until 2104, the interest rate on the securities will be reset at an interest rate equal to the then prevailing Government of Canada yield plus 7.05 percent.

Shares of the bank were trading down 2.7 percent at C$36.40 Thursday afternoon on the Toronto Stock Exchange.