HSBC plans Annual Income Opportunity CDs with floor tied to stocks

By Jennifer Chiou

New York, Feb. 1 - HSBC Bank USA, NA plans to price Annual Income Opportunity certificates of deposit with minimum return due March 1, 2019 linked to an industry titans basket of 10 common stocks, according to a term sheet.

The basket includes Dow Chemical Co., Eli Lilly & Co., Freeport-McMoRan Copper & Gold Inc., Goldcorp, Inc., Kraft Foods Inc., McDonald's Corp., Paychex, Inc., Raytheon Co., Reynolds American 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 0.25% per year.

A stock's performance will be equal to the auto cap rate if its return is zero or positive. The auto cap rate is expected to be at least 5.5% and will be set at pricing. If a stock's return is negative, its performance will be the greater of its return and negative 30%.

The payout at maturity will be par plus the last coupon payment.

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 3.25% in year one, 2.25% in year two, 1.25% in year three and 0.25% in year four. There is no charge in the final three years.

The CDs (Cusip: 40431GH93) will price on Feb. 24 and settle on Feb. 29.

HSBC Securities (USA) Inc. is the agent.

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