HSBC plans six-year income opportunity CDs on U.S. industry titans

By Jennifer Chiou

New York, June 2 - HSBC Bank USA, NA plans to price annual income opportunity certificates of deposit with auto cap feature due June 30, 2017 linked to a basket of stocks, according to a term sheet.

The basket includes the common stocks of Bank of America Corp., Bristol-Myers Squibb Co., Broadcom Corp., Entergy Corp., Mosaic Co., Newmont Mining Corp., Schlumberger Ltd., Tiffany & Co., Verizon Communications, Waste Management, Inc., WellPoint Inc. and Yahoo! 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 floor 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% to 10% 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 July 31, 2012, July 31, 2013, July 31, 2014, July 31, 2015, and July 29, 2016. Investors will receive the current market value of the CDs minus an early redemption charge of 3.5% in year one, 2.5% in year two, 1.5% in year three and 0.5% in year four. There is no redemption charge in the final two years.

The CDs (Cusip: 40431GTN9) will price on June 27 and settle on June 30.

HSBC Securities (USA) Inc. is the agent.

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