Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-259205
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The information in this preliminary pricing supplement is not complete and may be changed.
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Preliminary Pricing Supplement
Subject to Completion
Dated August 16, 2022 To the Product Prospectus Supplement FIN-1 Dated
September 14, 2021, and the Prospectus and Prospectus
Supplement, each dated September 14, 2021
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$______
Collared SOFR Floating Rate Notes, Due
February 22, 2023
Royal Bank of Canada
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Underwriter:
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RBC Capital Markets, LLC
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Currency:
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U.S. Dollars
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Minimum Investment:
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$1,000 and minimum denominations of $1,000 in excess of $1,000
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Pricing Date:
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August 18, 2022
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Issue Date:
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August 22, 2022
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Maturity Date:
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February 22, 2023
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Interest Rate:
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The Notes will bear interest at a per annum rate based on the Reference Rate, subject to the Coupon Floor and the Coupon Cap.
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Reference Rate:
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The Reference Rate will be compounded SOFR, calculated as described in this document.
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Coupon Cap:
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3.50%
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Coupon Floor:
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3.00%
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Day Count Fraction:
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Interest will be calculated on a 30/360 basis.
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Interest Payment
Dates:
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Quarterly, on the 22nd day of each February and November, commencing on November 22, 2022 and ending on the Maturity Date. If an Interest Payment Date falls on a day that is not a business
day in New York City, that Interest Payment Day will be postponed to the next day that is such a business day, with the same effect as if paid on the original due date. However, if the next such business day falls in the next calendar
month, then the interest payment date will be advanced to the next preceding day that is a business day in New York City.
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Interest Period
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Each period from, and including, an Interest Payment Date (or, for the first period, the issue date) to, but excluding, the next following Interest Payment Date.
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Interest Determination
Dates:
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Five U.S. Government Securities Business Days prior to the applicable Interest Payment Date. A “U.S. Government Securities Business Day” is any day except for a Saturday, a Sunday, or a day on which the
Securities Industry and Financial Markets Association (or any successor thereto) recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
Compounded SOFR:
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Interest on the Notes will be determined based on the daily compounding of interest, with the daily SOFR used for the calculation of interest.
The interest payable on the Notes will be calculated by the Calculation Agent on each relevant Interest Determination Date occurring prior to the applicable Interest
Payment Date as follows. The resulting percentage will be rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards:
Where:
“d” is the number of calendar days in the relevant interest period;
“do” is the number of U.S. Government Securities Business Days in the relevant Observation Period;
“i” is a series of whole numbers from one to do, each representing the relevant U.S. Government Securities Business Day in chronological order from, and
including, the first U.S. Government Securities Business Day in the relevant Observation Period;
“ni”, for any U.S. Government Securities Business Day “i”, means the number of calendar days from, and including, such U.S. Government Securities Business
Day “i” up to, but excluding, the following U.S. Government Securities Business Day;
“Observation Period” means the period from, and including, the date falling five U.S. Government Securities Business Days prior to the first day of the relevant
interest period to (but excluding) the date falling five U.S. Government Securities Business Days prior to last day included in the relevant interest period;
“SOFR reference rate,” in respect of any U.S. Government Securities Business Day is a reference rate equal to the daily secured overnight financing (“SOFR”) rate for
that day, as provided by the Federal Reserve Bank of New York, as the administrator of such rate (or any successor administrator of such rate) on the website of the Federal Reserve Bank of New York currently at www.newyorkfed.org, or
any successor website of the Federal Reserve Bank of New York (in each case, on or about 5:00 p.m., New York City time, on the U.S. Government Securities Business Day immediately following that day); provided, however, if that rate is
not available at or around the indicated time on such date (and a Benchmark Transition Event and its related Benchmark Replacement Date (each as defined below) have not occurred), the SOFR reference rate for the applicable U.S.
Government Securities Business Day will be the SOFR rate in respect of the last U.S. Government Securities Business Day for which such rate was published on the Federal Reserve Bank of New York’s website; and
“SOFRi-5USBD” means, in respect of any U.S. Government Securities Business Day “i”, the SOFR reference rate for the U.S. Government Securities Business Day
falling five U.S. Government Securities Business Days prior to the relevant U.S. Government Securities Business Day “i”.
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Redemption:
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Not Applicable.
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Survivor’s Option:
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Not Applicable.
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
Calculation Agent:
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RBC Capital Markets, LLC
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Listing:
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The Notes will not be listed on any securities exchange.
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Clearance and
Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in the prospectus dated September 14,
2021).
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Canadian Bail-in:
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The Notes are not subject to conversion into our common shares under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act.
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U.S. Tax Treatment:
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In the opinion of our special U.S. tax counsel, Ashurst LLP, it would generally be reasonable to treat the Notes, and we expect to take the position that the Notes will be treated, as debt
instruments subject to the rules governing short-term debt instruments. Under this treatment, all interest paid with respect to the notes is treated as “original issue discount”. There are no regulations, published rulings or judicial
decisions, however, that address the determination of orginal issue discount on short-term notes where interest payments are not fixed in amount. In the absence of authority, it would be reasonable for a U.S. holder to include interest
with respect to the Notes into income in accordance with the U.S. holder’s regular method of accounting.
Please see the discussion in the accompanying prospectus dated September 14, 2021 under the section entitled “Tax Consequences—United States Taxation” and specifically the discussion under
“Tax Consequences—United States Taxation—Original Issue Discount—Variable Rate Debt Securities,” and in the product prospectus supplement FIN-1 dated September 14, 2021 (including the opinion of our special U.S. tax counsel) under
“Supplemental Discussion of U.S. Federal Income Tax Consequences” and specifically the discussion under “Supplemental Discussion of U.S. Federal Income Tax Consequences—Supplemental U.S. Tax Considerations—Where the term of your notes
will not exceed one year—Range Accrual Notes, Dual Range Accrual Notes, Non-Inversion Range Accrual Notes, Floating Rate Notes, Inverse Floating Rate Notes, Leveraged Steepener Notes, Fixed-to-Floating Rate Notes, Floating-to-Fixed
Rate Notes and Leveraged Notes,” and “Supplemental Discussion of U.S. Federal Income Tax Consequences—Supplemental U.S. Tax Considerations—Where the term of your notes will not exceed one year—Treatment Upon Sale, Redemption or
Maturity,” which apply to your Notes.
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Terms Incorporated in
the Master Note:
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All of the terms appearing above the item captioned “Listing” on pages P-2 of this pricing supplement and the applicable terms appearing under the caption “General Terms of the Notes” in the product
prospectus supplement FIN-1, as modified by this pricing supplement.
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
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will be conclusive and binding absent manifest error, may be made in the Calculation Agent’s sole discretion, notwithstanding anything to the contrary in this pricing supplement and the
accompanying product supplement, prospectus supplement and prospectus relating to the Notes;
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•
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if made by us, will be made in our sole discretion;
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if made by the Calculation Agent, will be made after consultation with us, and the Calculation Agent will not make any such determination, decision or election to which we object; and
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shall become effective without consent from any other party.
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(1) |
the sum of: (a) an alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor
and (b) the Benchmark Replacement Adjustment;
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(2) |
the sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement Adjustment; and
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
(3) |
provided that if (i) the Benchmark Replacement cannot be determined in accordance with clause (1) or (2) above as of the Benchmark Replacement Date or (ii) the Calculation Agent shall have determined that the
ISDA Fallback Rate determined in accordance with clause (2) above is not an industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes at such time, then the
Benchmark Replacement shall be the sum of: (a) the alternate rate of interest that has been selected by the Calculation Agent as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due
consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar denominated floating rate notes at such time and (b) the Benchmark Replacement Adjustment.
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(1) |
the spread adjustment (which may be a positive or negative value or zero), or method for calculating or determining such spread adjustment that has been selected or recommended by the Relevant Governmental
Body for the applicable Unadjusted Benchmark Replacement;
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(2) |
if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment; and
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(3) |
the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Calculation Agent giving due consideration to any industry-accepted spread adjustment, or method for
calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated floating rate notes at such time.
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(1) |
in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which
the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or
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(2) |
in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |
(1) |
a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or
indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
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(2) |
a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with
jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for
the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor
administrator that will continue to provide the Benchmark; or
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(3) |
a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.
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Collared SOFR Floating Rate Notes
Royal Bank of Canada |