UPDATE 1-Mizuho to issue 500 bln yen in subordinated debt

* Japan's No.2 bank to raise 500 bln yen

* Interest and maturity on debt undecided

* Bank says debt is refinancing, not fundraising (Adds details and background)

TOKYO, April 24 (Reuters) - Mizuho Financial Group (8411.T), Japan's second-largest bank, will issue 500 billion yen ($5.1 billion) in unsecured, subordinated bonds, a regulatory filing showed on Friday.

Mizuho Bank, the group's retail arm, plans to issue the debt between May 2, 2009, and May 1, 2011, a document filed with Japan's Ministry of Finance showed.

The interest and maturity on the bonds have yet to be set.

Mizuho spokeswoman Masako Shiono said the bank was not raising new funds through the issuance but refinancing existing debt.

Mizuho on Thursday warned it would fall to an annual net loss of $5.9 billion, hit by a sharp decline in its stock holdings and higher bad loan costs.

Analysts have said the bank, which is headed for its first annual loss in six years, may have to raise more funds to shore up its capital base.

Mizuho has already raised about $9.4 billion since July through preferred shares and subordinated loans. The bank may need to raise up to an additional 1.4 trillion yen ($14.3 billion), UBS said in a research note this month.

Unlike Western banks, Japanese lenders take stakes in their corporate clients as a way to seal business ties. Japan's banks held 25.6 trillion yen worth of shares at the end of March 2008, the Japanese Bankers Association says.

The benchmark Nikkei share average .N225 fell about 35 percent in the year that ended on March 31, implying a 9 trillion yen loss on banks' stock portfolios.

Lenders have also been hurt by soured loans caused by the worst global downturn since the 1930s. Japanese banks are likely to face another lean year as credit costs remain high, the head of Japan's bank lobby said this month. [ID:nT53185] (Reporting by David Dolan; Editing by Hugh Lawson)