HSBC plans seven-year CDs linked to 12 Morningstar Wide Moat stocks

By Jennifer Chiou

New York, July 6 - HSBC Bank USA, NA plans to price annual income opportunity certificates of deposit with auto cap due July 30, 2018 linked to a basket of stocks, according to a term sheet.

The basket includes 12 common stocks that have received a Morningstar Economic Moat rating of "Wide" as of June 23. The term sheet said there are two major requirements for the rating: the prospect of earning above-average returns on capital and some competitive edge that prevents these returns from quickly eroding.

The stocks are Amazon.com, Inc., Avon Products, Inc., Coca-Cola Co., Colgate-Palmolive Co., Exxon Mobil Corp., Intel Corp., Maxim Integrated Products, Inc., McDonald's Corp., Merck & Co., Inc., Pfizer Inc., Philip Morris International and Qualcomm Inc.

The CDs will pay a coupon in June of each year equal to the average of the basket stocks' component returns, subject to a minimum of zero.

If a basket stock's underlying return is flat or positive, its component return will equal the auto cap rate, which is expected to be 7.5% to 10.5% and will be set at pricing. Otherwise, its component return will be the greater of its underlying return and negative 30%.

The payout at maturity will be par plus the final coupon.

The CDs will be putable on Aug. 31, 2012, Aug. 30, 2013, Aug. 29, 2014, Aug. 31, 2015, Aug. 31, 2016 and Aug. 31, 2017. Investors will receive the current market value of the CDs minus an early redemption charge of 3.75% in year one, 2.75% in year two, 1.75% in year three and 0.75% in year four. There is no redemption charge in the final two years.

The CDs (Cusip: 40431GVE6) will price on July 25 and settle on July 28.

HSBC Securities (USA) Inc. is the agent.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.