HSBC Bank plans to price sector selector CDs linked to ETF basket

By Angela McDaniels

Tacoma, Wash., Dec. 1 - HSBC Bank USA, NA plans to price 0% sector selector certificates of deposit with minimum return due Dec. 24, 2015 linked to a basket of exchange-traded funds, according to a term sheet.

The basket includes the iShares MSCI Emerging Markets index fund, Market Vectors Gold Miners, Energy Select Sector SPDR fund, Financial Select Sector SPDR fund, Healthcare Select Sector SPDR fund and Semiconductor Holdrs Trust.

The payout at maturity will be par plus the sum of the locked-in returns, subject to a minimum return of 3%.

On Dec. 21 of each year, the fund that has experienced the highest return on that day will be selected and its return will be the locked-in return for that observation date, subject to a cap that is expected to be 8% to 11% and will be set at pricing. This fund will then be removed from the basket.

The CDs will be putable on Dec. 30, 2010, Dec. 30, 2011, Dec. 31, 2012, Dec. 30, 2013 and Dec. 30, 2014. The redemption amount will be the then-current market value of the CDs minus an early redemption charge of 3% in year one, 2% in year two and 1% in year three. There is no charge in years four through six.

The CDs will price Dec. 21 and settle Dec. 24.

HSBC Securities (USA) Inc. is the agent. Advisors Asset Management, Inc. is the distributor.

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