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HSBC plans CDs with step-up auto cap rate linked to industry titans
By Toni Weeks
San Diego, Sept. 4 - HSBC Bank USA, NA plans to price Annual Income Opportunity certificates of deposit with step-up auto cap rate due Sept. 30, 2019 linked to a basket of 10 common stocks, according to a term sheet.
The basket includes Barrick Gold Corp., Bristol-Myers Squibb Co., Conagra Foods Inc., FirstEnergy Corp., Halliburton Co., Intel Corp., PNC Financial Services Group, Inc., Tiffany & Co., UnitedHealth Group Inc. and Verizon Communications Inc.
Interest is payable annually and will equal the average of the performances of the basket stocks, subject to a minimum interest rate of zero.
A stock's performance will be equal to the auto cap rate if its return is greater than or equal to zero. If a stock's return is less than zero, its performance will be the greater of its return and negative 25%. The auto cap rate is expected to be 5.5% in year one, 5.65% in year two, 5.8% in year three, 5.95% in year four, 6.1% in year five, 6.25% in year six and 6.4% in year seven. The exact rates will be set at pricing.
The payout at maturity will be par plus the last coupon payment, if any.
The issuer said it is generally willing to repurchase CDs from depositors at any time. It will pay the early redemption amount, which equals par plus any interest due plus the early redemption fee and less an early withdrawal charge of 3% in year one, 2% in year two, 1% in year three and zero after that. The early redemption fee is the current market value of the CDs minus any interest due and minus the principal amount of the CDs.
The CDs will price Sept. 25 and settle Sept. 28.
HSBC Securities (USA) Inc. is the agent.
The Cusip number is 40431G2R9.
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