Perpetual subordinated debt is not straight debt, rather it is close to, or in some cases identical to, preferred shares, paying a fixed-rate coupon similar to preferred shares' fixed-rate dividend.
Tier 2 capital consists of subordinated debt, intermediate-term preferred stock, cumulative and long-term preferred stock, and a portion of a bank's allowance for loan and lease losses.
The multiplier is then used as input to the contingent conversion formula, which determines the number of shares a subordinated debt holder would receive.