HSBC plans income opportunity CDs on Morningstar Wide Moat stocks

By Jennifer Chiou

New York, Feb. 2 - HSBC Bank USA, NA plans to price series 3 annual income opportunity certificates of deposit with auto cap feature due Feb. 26, 2015 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 Jan. 21. The term sheet said there are two majority 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 American Express Co., Amgen Inc., Applied Materials, Inc., Hershey Co., Home Depot, Inc., McDonald's Corp., McGraw-Hill Cos., Inc., Medtronic, Inc., Merck & Co., Inc., Monsanto Co., Proctor & Gamble and United Parcel Service, Inc.

The CDs will pay a coupon in February 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 4.5% to 6.5% 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.

The CDs will be putable on March 30, 2012, March 28, 2013 and March 31, 2014. Investors will receive the current market value of the CDs, which may be substantially less than the principal amount.

The CDs (Cusip: 40431GMH9) will price on Feb. 22 and settle on Feb. 25.

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.