HSBC sets financing threshold for tender offers at $3.5 billion

By Marisa Wong

Los Angeles, May 29 – HSBC Holdings plc announced it set the total available amount at $3.5 billion for the purposes of the financing condition under its five tender offers launched on Thursday.

HSBC is offering to purchase for cash any and all of the outstanding notes from five series totaling $10 billion.

Specifically, HSBC is offering to purchase the following notes, listed in order of acceptance priority:

• $3 billion 3.4% senior notes due March 8, 2021 (Cusip: 404280AV1) at a price based on the bid-side yield of the 1.125% U.S. Treasury due Feb. 28, 2021 plus a fixed spread of 25 basis points;

• $2.5 billion 5.1% senior notes due April 5, 2021 (Cusip: 404280AK5) at a price based on the bid-side yield of the 1.25% U.S. Treasury due March 31, 2021 plus a fixed spread of 25 bps;

• $2.5 billion 2.95% senior notes due May 25, 2021 (Cusip: 404280AY5) at a price based on the bid-side yield of the 2.625% U.S. Treasury due May 15, 2021 plus a fixed spread 30 bps;

• $1 billion floating-rate senior notes due March 8, 2021 (Cusip: 404280AX7) at a fixed price of $1,013.93 per $1,000 principal amount; and

• $1 billion floating-rate senior notes due May 25, 2021 (Cusip: 404280AZ2) at a fixed price of $1,012.29 per $1,000 principal amount.

Each of the five offers will expire at 5 p.m. ET on June 4. Tenders may be withdrawn at any time prior to the expiration time.

Pricing is to be set at 11 a.m. ET on June 4.

Settlement is expected to occur on June 9.

Holders will also receive accrued interest to but excluding the settlement date.

Financing condition

HSBC said it will accept notes in order of acceptance priority level, subject to satisfaction of the financing condition.

The issuer plans to use proceeds from an issuance of new senior debt securities to finance the tender offers. The company announced on Friday that it priced $2 billion of fixed-to-floating rate notes due 2026 and $1.5 billion of fixed-to-floating rate notes due 2031.

Each of the tender offers is conditioned on the aggregate principal amount of the new issuance being sufficient to fund the sum of (i) the consideration, excluding accrued interest, for all tendered notes of that series plus (ii) the aggregate consideration, excluding accrued interest, for all tendered notes of each series having a higher acceptance priority level other than excluded notes.

If the financing condition is not satisfied for a particular series of notes, at any time at or prior to the expiration time, then

• The issuer will not be obligated to accept for purchase that series of notes and will terminate the offer for that series (these notes would be the excluded notes); and

• If there is any series of notes having a lower acceptance priority level for which the financing condition is met, meaning the total available amount is equal to or greater than the sum of (i) the consideration necessary to purchase all tendered notes of that series plus (ii) the aggregate consideration necessary to purchase all tendered notes of all series having a higher acceptance priority level than that series, other than the excluded notes, then all notes of that series having a lower acceptance priority level will be accepted for purchase, and the financing condition will be applied at each subsequent acceptance priority level until there is no series of notes with a lower acceptance priority level to be considered for purchase for which the financing condition is met.

It is possible that any series of notes with any acceptance priority level will fail to meet the financing condition and therefore will not be accepted for purchase even if one or more series with a lower acceptance priority level is accepted for purchase.

If any series of notes is accepted for purchase under the offers, all notes of that series that are tendered will be accepted for purchase. As a result, no series of notes accepted for purchase will be prorated.

The purpose of the offers is to improve HSBC’s liabilities structure, because the notes have ceased to qualify as eligible liabilities items under CRR as they have a residual maturity of less than 12 months, according to a prior press release. CRR refers to regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions and investment firms.

HSBC Bank plc (+44 20 7992 6237, 212 525-5552, 888 HSBC-4LM or liability.management@hsbcib.com) is dealer manager for the offers.

Global Bondholder Services Corp. (866 470-4300 or, for banks and brokers, 212 430-3774) is the information agent.

The investment banking company is based in London.

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