HSBC plans seven-year income opportunity CDs on U.S. industry titans

By Jennifer Chiou

New York, July 6 - HSBC Bank USA, NA plans to price annual income opportunity certificates of deposit with auto cap due July 30, 2018 linked to a basket of stocks, according to a term sheet.

The basket includes the common stocks of Applied Materials, Inc., Biogen Idec Inc., BlackRock, Inc., Boston Scientific Corp., Companhia de Bebidas, eBay Inc., Harley-Davidson, Inc., Johnson & Johnson, Maxim Integrated Products, Inc., Monsanto Co., Potash Corp. and Vulcan Materials Co.

The CDs will pay a coupon in July of each year equal to the average of the basket stocks' component returns, subject to a floor 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 7.5% to 10.5% 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 Aug. 31, 2012, Aug. 30, 2013, Aug. 29, 2014, Aug. 31, 2015, Aug. 31, 2016 and Aug. 31, 2017. Investors will receive the current market value of the CDs minus an early redemption charge of 3.75% in year one, 2.75% in year two, 1.75% in year three and 0.75% in year four. There is no redemption charge in the final three years.

The CDs (Cusip: 40431GUK3) will price on July 28 and settle on July 30.

HSBC Securities (USA) Inc. is the agent.

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