HSBC plans annual income opportunity CDs tied to basket of 12 Morningstar Wide Moat stocks

By Toni Weeks

San Diego, Aug. 3 - HSBC Bank USA, NA, New York Branch plans to price annual income opportunity CDs with auto cap due Aug. 30, 2018 linked to a basket of 12 stocks, according to a term sheet.

The basket includes common stocks that have received a Morningstar Economic Moat rating of "Wide" as of July 25. The term sheet said there are two major 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 Amazon.com, Inc., Avon Products, Inc., Coca-Cola Co., Colgate-Palmolive Co., Exxon Mobil Corp., Intel Corp., Maxim Integrated Products, Inc., McDonald's Corp., Merck & Co., Inc., Pfizer Inc., Philip Morris International and Qualcomm Inc.

Interest is payable annually and will equal the average of the performances of the basket stocks, subject to a floor of zero.

If a basket stock's return is zero or positive, its performance will be fixed at 7% to 10%. The exact auto cap rate will be determined at pricing. If a basket stock's return is negative, its performance will be the greater of the stock return and negative 30%.

The payout at maturity will be par.

The CDs (Cusip: 40431GVX4) are expected to price Aug. 25 and settle Aug. 30.

HSBC Securities (USA) Inc. is the agent.

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