HSBC plans income opportunity CDs linked to global industry titans

By Marisa Wong

Madison, Wis., Jan. 5 - HSBC Bank USA, NA plans to price annual income opportunity certificates of deposit with auto cap feature due Jan. 31, 2017 linked to a basket of stocks, according to a term sheet.

The basket includes the common stocks of Credit Suisse Group AG, Gold Fields Ltd., Kraft Foods Inc., Mechel, Nokia Corp., Petroleo Brasileiro SA, Raytheon Co., Taiwan Semiconductor Manufacturing, Teva Pharmaceutical Industries Ltd., Toyota Motor Corp., Vodafone Group plc and Wal-Mart Stores, Inc.

The CDs will pay a coupon in January of each year equal to the average of the basket stocks' component returns, subject to a minimum 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 Feb. 29, 2012, Feb. 28, 2013, Feb. 28, 2014, Feb. 27, 2015 and Feb. 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 year five.

The CDs (Cusip: 40431GKM0) will price on Jan. 26 and settle on Jan. 31.

HSBC Securities (USA) Inc. is the agent.

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