Filed Pursuant to Rule 433
Registration Statement No. 333-259205
|
|||
The information in this preliminary
terms supplement is not complete and may be changed.
|
|||
Preliminary Terms Supplement
Subject to Completion:
Dated March 31, 2023
Pricing Supplement Dated April __, 2023 to the Product Prospectus Supplement ERN-EI-1 Dated
September 14, 2021, Prospectus Supplement Dated September 14, 2021, and Prospectus Dated September 14, 2021
|
$_____
Barrier Booster Notes Linked to the S&P 500® Index,
Due April 30, 2029
Royal Bank of Canada
|
||
Reference Asset
|
Initial Level
|
Barrier Level
|
||
S&P 500® Index (“SPX”)
|
The closing level of the Reference
Asset on the Trade Date
|
70.00% of the Initial Level
|
Issuer:
|
Royal Bank of Canada
|
Stock Exchange Listing:
|
None
|
Trade Date:
|
April 25, 2023
|
Principal Amount:
|
$1,000 per Note
|
Issue Date:
|
April 28, 2023
|
Maturity Date:
|
April 30, 2029
|
Valuation Date:
|
April 25, 2029
|
Booster Coupon:
|
[45.00% to 50.00%] (to be determined on the Trade Date)
|
Initial Level:
|
The closing level of the Reference Asset on the Trade Date.
|
||
Final Level:
|
The closing level of the Reference Asset on the Valuation Date.
|
||
Payment at Maturity:
|
If the Final Level is greater than or equal to the Initial Level but the Percentage Change does not exceed the Booster Coupon, the Notes provide a fixed
return equal to the Principal Amount plus the Booster Coupon. If the Final Level is greater than the Initial Level, and the Percentage Change exceeds the Booster Coupon, the Notes provide a one-for-one positive return based upon the
increase in the level of the Reference Asset.
If the Final Level is less than the Initial Level, but is not less than the Barrier Level, then the investor will receive the principal amount only. If
the Final Level is less than the Barrier Level (70.00% of the Initial Level), you will receive an amount at maturity that is proportionate to the decrease in the Reference Asset over the term of the Notes, and you may lose up to 100% of
your initial investment.
|
||
Interest Payments:
|
None.
|
||
CUSIP:
|
78016HX96
|
Per Note
|
Total
|
||
Price to public(1)
|
100.00%
|
$
|
|
Underwriting discounts and commissions(1)
|
3.25%
|
$
|
|
Proceeds to Royal Bank of Canada
|
96.75%
|
$
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
General:
|
This terms supplement relates to an offering of Barrier Booster Notes (the “Notes”) linked to the performance of the
S&P 500® Index (the “Reference Asset”).
|
Issuer:
|
Royal Bank of Canada (“Royal Bank of Canada”)
|
Trade Date (Pricing
Date):
|
April 25, 2023
|
Issue Date:
|
April 28, 2023
|
Valuation Date:
|
April 25, 2029
|
Maturity Date:
|
April 30, 2029
|
Denominations:
|
Minimum denomination of $1,000, and integral multiples of $1,000 thereafter.
|
Initial Level:
|
The closing level of the Reference Asset on the Trade Date.
|
Final Level:
|
The closing level of the Reference Asset on the Valuation Date.
|
Barrier Level:
|
70% of the Initial Level.
|
Barrier Percentage:
|
30%
|
Booster Coupon:
|
[45.00% to 50.00%] (to be determined on the Trade Date)
|
Payment at Maturity:
|
If the Percentage Change is zero or positive, but does not exceed the Booster Coupon, then the investor will receive an amount equal to the principal amount
plus the Booster Coupon.
If, on the Valuation Date, the Percentage Change is greater than the Booster Coupon, then the investor will receive an amount equal to:
Principal Amount + (Principal Amount x Percentage Change)
If the Percentage Change is less than 0%, but the Final Level has not decreased by more than the Barrier Percentage (that is, the Percentage Change is
between -0.01% and -30.00%), then the investor will receive the principal amount only.
If the Percentage Change is negative, and the Final Level has decreased by more than the Barrier Percentage (that is, the Percentage Change is between
-30.01% and -100%), then the investor will receive a cash payment equal to:
Principal Amount + (Principal Amount x Percentage Change)
In this case, you will lose all or a portion of the principal amount of the Notes.
|
Percentage Change:
|
Final Level – Initial Level
Initial Level
|
Calculation Agent:
|
RBC Capital Markets, LLC (“RBCCM”)
|
U.S. Tax Treatment:
|
By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a
judicial ruling to the contrary) to treat the Note as a pre-paid cash-settled derivative contract in respect of the Reference Asset for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment
in the Notes are uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of
U.S. Federal Income Tax Consequences,” and the discussion (including the opinion of Ashurst LLP, our special U.S. tax counsel) in the product prospectus supplement dated September 14, 2021 under “Supplemental Discussion of U.S. Federal
Income Tax Consequences,” which apply to the Notes.
|
Secondary Market:
|
RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The amount
that you may receive upon sale of your Notes prior to maturity may be less than the principal amount.
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
Listing:
|
The Notes will not be listed on any securities exchange.
|
Settlement:
|
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).
|
Terms Incorporated
in the Master Note:
|
All of the terms appearing on the cover page and above the item captioned “Secondary Market” on pages P-2 and P-3 of this terms supplement and the
terms appearing under the caption “General Terms of the Notes” in the product prospectus supplement dated September 14, 2021, as modified by this terms supplement.
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
Example 1—
|
Calculation of the Payment at Maturity where the Percentage Change is positive, but less than the Booster Coupon.
|
|
Percentage Change:
|
10%, which is less than the Booster Coupon
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x 47.50%) = $1,000 + $475.00 = $1,475.00
|
|
On a $1,000 investment, a 10% Percentage Change results in a Payment at Maturity of $1,475.00, a 47.50% return on the Notes.
|
Example 2—
|
Calculation of the Payment at Maturity where the Percentage Change is positive and exceeds the Booster Coupon.
|
|
Percentage Change:
|
70%
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x 70.00%) = $1,000 + $700.00 = $1,700.00
|
|
On a $1,000 investment, a 70% Percentage Change results in a Payment at Maturity of $1,700.00, a 70.00% return on the Notes.
|
Example 3—
|
Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the Barrier Percentage).
|
|
Percentage Change:
|
-10%
|
|
Payment at Maturity:
|
At maturity, if the Percentage Change is negative BUT not by more than the Barrier Percentage, then the Payment at Maturity will equal the principal
amount.
|
|
On a $1,000 investment, a -10% Percentage Change results in a Payment at Maturity of $1,000,
a 0% return on the Notes.
|
Example 4—
|
Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Barrier Percentage).
|
|
Percentage Change:
|
-45%
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x -45.00%) = $1,000 - $450.00 = $550.00
|
|
On a $1,000 investment, a -45% Percentage Change results in a Payment at Maturity of $550.00, a -45% return on the Notes.
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
• |
You May Lose All or a Substantial Portion of the Principal Amount at Maturity – Investors in the Notes could lose
all or a substantial portion of their principal amount if there is a decline in the level of the Reference Asset between the Trade Date and the Valuation Date of more than 30%. In such a case, you will lose 1% of the principal amount of
your Notes for each 1% that the Final Level is less than the Initial Level.
|
• |
The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable
Maturity – You will not receive any interest payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could
be negative, may be less than the return you could earn on other investments. The return on the Notes may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
|
• |
Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market
Value of the Notes – The Notes are our senior unsecured debt securities. As a result, your receipt of the Redemption Amount is dependent upon our ability to repay our obligations at that time. This will be the case even if the
level of the Reference Asset increases after the Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
|
• |
There May Not Be an Active Trading Market for the Notes – Sales in the Secondary Market May Result in Significant Losses – There may be little or no secondary market for the Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates
may make a market for the Notes; however, they are not required to do so. RBCCM or any of our other affiliates may stop any market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide
significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any secondary market would be high. As a result, the difference between bid and asked prices for your Notes in any secondary market could be
substantial.
|
• |
The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value that will be set forth on the cover page of the final pricing supplement for the Notes does not represent a minimum price at which we, RBCCM or any of our
affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial
estimated value. This is due to, among other things, changes in the level of the Reference Asset, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of the underwriting discount and the
estimated costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any
secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to
maturity may be less than your original purchase price, as any such sale price would not be expected to include the underwriting discount and the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes
determined by RBCCM for any secondary market price is expected to be based on the secondary rate rather than the internal funding rate used to price the Notes and determine the initial estimated value. As a result, the secondary price will
be less than if the internal funding rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
• |
The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only,
Calculated as of the Time the Terms of the Notes Are Set — The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the
derivative embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the
expected term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we
do.
|
• |
Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading
activities related to the Reference Asset that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our
affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence
the level of the Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Reference Asset,
including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’
obligations and your interests as a holder of the Notes. Moreover, we, and our affiliates may have published, and in the future expect to publish, research reports with respect to the Reference Asset. This research is modified from time to
time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the level of the Reference Asset,
and therefore, the market value of the Notes.
|
• |
You Will Not Have Any Rights to the Securities Included in the Reference Asset – As a holder of the Notes, you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included
in the Reference Asset would have. The Final Level will not reflect any dividends paid on the securities included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on
those securities.
|
• |
The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments – The
Redemption Amount and the Valuation Date are subject to adjustment as to the Reference Asset as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of
that market disruption event, see “General Terms of the Notes—Market Disruption Events” in the product prospectus supplement.
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|
|
|
Barrier Booster Notes Linked to
the S&P 500® Index
|