HSBC plans Head-Start Annual Income Opportunity CDs linked to stocks

By Angela McDaniels

Tacoma, Wash., April 2 - HSBC Bank USA, NA plans to price Head-Start Annual Income Opportunity certificates of deposit with auto cap feature due April 29, 2019 linked to a basket of 10 common stocks, according to a term sheet.

The basket includes American Electric Power Co., AT&T Inc., Biogen Idec Inc., Kimberley-Clark Corp., Lockheed Martin Corp., Maxim Integrated Products, Mosaic Co., Pfizer Inc., Ralph Lauran Corp. and Silver Wheaton Corp.

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 negative 5%. The auto cap rate is expected to be at least 6.25% will be set at pricing. If a stock's return is less than negative 5%, its performance will be the greater of its return and negative 30%.

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 3.5% in year one, 2.5% in year two, 1.5% in year three, 0.5% in year four 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 (Cusip: 40431GQ51) will price April 24 and settle April 27.

HSBC Securities (USA) Inc. is the agent.

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