HSBC plans income opportunity CDs linked to global industry titans

By Jennifer Chiou

New York, May 2 - HSBC Bank USA, NA plans to price annual income opportunity certificates of deposit with auto cap feature due May 31, 2017 linked to a basket of stocks, according to a term sheet.

The basket includes Banco Santander SA, Boeing Co., China Life Insurance Co., Ltd., Companhia Siderurgica Nacional SA, Research In Motion Ltd., Rio Tinto plc, Sanofi-Aventis, SAP AG, Sasol, Sony Corp., Southern Co. and Telefonaktiebolaget LM Ericsson.

The CDs will pay a coupon in May 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 June 29, 2012, June 28, 2013, June 30, 2014, June 30, 2015, and June 30, 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 years five or six.

The CDs (Cusip: 40431GRL5) will price on May 25 and settle on May 31.

HSBC Securities (USA) Inc. is the agent.

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