Subject To Completion, dated August 8, 2022
PRICING SUPPLEMENT No. WFC186 dated August __, 2022
(To Product Supplement No. WF1 dated July 6, 2022,
Prospectus Supplement dated September 14, 2021
and Prospectus dated September 14, 2021)
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Filed Pursuant to Rule 433
Registration Statement No. 333-259205
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Royal Bank of Canada
Senior Global Medium-Term Notes, Series I
Equity Index Linked Securities
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Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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■ Linked to the S&P 500® Index (the "Index")
■ Unlike ordinary debt securities, the securities do not pay interest or repay a fixed amount of principal at maturity. Instead, the securities provide for a maturity payment amount that may be greater than,
equal to or less than the face amount of the securities, depending on the performance of the Index from its starting level to its ending level. The maturity payment amount will reflect the following terms:
■ If the level of the Index increases, you will receive the face amount plus a positive return equal to 100% of the percentage increase in the level of the Index from the starting level, subject to a maximum return at maturity of at least 59.00% (to be determined on the pricing date) of the face amount. As a result of the maximum return, the maximum
maturity payment amount will be at least $1,590.00
■
If the level of the Index decreases but the decrease is not more than the buffer amount of 15%, you will receive the face amount
■
If the level of the Index decreases by more than the buffer amount, you will receive less than the face amount and have 1-to-1 downside exposure to the decrease in the level of the Index in excess of the buffer amount
■ Investors may lose up to 85% of the face amount
■ All payments on the securities are subject to credit risk, and you will have no ability to pursue any securities included in the Index for payment; if Royal Bank of Canada, as issuer, defaults on its
obligations, you could lose some or all of your investment
■ No periodic interest payments or dividends
■ No exchange listing; designed to be held to maturity
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Original Offering Price
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Agent Discount(1)(2)
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Proceeds to Royal Bank of
Canada
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Per Security
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$1,000.00
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$42.50
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$957.50
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Total
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(1) |
Wells Fargo Securities, LLC is the agent for the distribution of the securities and is acting as principal. See "Terms of the Securities—Agent" and "Estimated Value of the Securities" in this pricing supplement for
further information.
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(2) |
In addition to the forgoing, in respect of certain securities sold in this offering, our affiliate, RBC Capital Markets, LLC ("RBCCM"), may pay a fee of up to $4.00 per security to selected securities dealers
in consideration for marketing and other services in connection with the distribution of the securities to other securities dealers.
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Terms of the Securities
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Issuer:
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Royal Bank of Canada.
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Market Measure:
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S&P 500® Index (the "Index").
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Pricing Date*:
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August 15, 2022.
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Issue Date*:
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August 18, 2022.
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Original Offering
Price:
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$1,000 per security.
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Face Amount:
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$1,000 per security. References in this pricing supplement to a "security" are to a security with a face amount of $1,000.
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Maturity Payment
Amount:
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On the stated maturity date, you will be entitled to receive a cash payment per security in U.S. dollars equal to the maturity payment amount. The "maturity payment
amount" per security will equal:
• if the ending level is greater than the starting level: $1,000 plus the lesser of:
(i) $1,000 × index return × upside participation rate; and
(ii) the maximum return;
• if the ending level is less than or equal to the starting level, but greater than or equal to the threshold level: $1,000; or
• if the ending level is less than the threshold level:
$1,000 + [$1,000 × (index return + buffer amount)]
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If the ending level is less than the threshold level, you will have 1-to-1 downside exposure to the decrease in the level of the Index in excess of the
buffer amount and will lose some, and possibly up to 85%, of the face amount of your securities at maturity.
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Stated Maturity
Date*:
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November 18, 2026, subject to postponement. The securities are not subject to redemption by Royal Bank of Canada or repayment at the option of any holder of the securities
prior to the stated maturity date.
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Starting Level:
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____, the closing level of the Index on the pricing date.
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Closing Level:
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Closing level has the meaning set forth under "General Terms of the Securities—Certain Terms for Securities Linked to an Index—Certain Definitions" in the accompanying
product supplement.
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Ending Level:
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The "ending level" will be the closing level of the Index on the calculation day.
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Maximum Return:
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The "maximum return" will be determined on the pricing date and will be at least 59.00% of the face amount per security (at least $590.00 per security). As a result
of the maximum return, the maximum maturity payment amount will be at least $1,590.00 per security.
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Threshold Level:
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____, which is equal to 85% of the starting level.
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Buffer Amount:
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15%.
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Upside
Participation Rate:
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100%.
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Index Return:
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The "index return" is the percentage change from the starting level to the ending level, measured as follows:
ending level – starting level
starting level
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Calculation Day*:
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November 10, 2026, subject to postponement.
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Market Disruption
Events and
Postponement
Provisions:
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The calculation day is subject to postponement due to non-trading days and the occurrence of a market disruption event. In addition, the stated maturity date will be
postponed if the calculation day is postponed and will be adjusted for non-business days.
For more information regarding adjustments to the calculation day and the stated maturity date, see "General Terms of the Securities—Consequences of a Market Disruption
Event; Postponement of a Calculation Day—Securities Linked to a Single Market Measure" and "—Payment Dates" in the accompanying product
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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supplement. In addition, for information regarding the circumstances that may result in a market disruption event, see "General Terms of the Securities—Certain Terms for
Securities Linked to an Index—Market Disruption Events" in the accompanying product supplement.
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Calculation Agent:
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RBC Capital Markets, LLC ("RBCCM")
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Material Tax
Consequences:
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For a discussion of the material U.S. federal income and certain estate tax consequences of the ownership and disposition of the securities, see "United States Federal Tax
Considerations." For a discussion of the material Canadian federal income tax consequences relating to the securities, please see the section of the product supplement, "Canadian Federal Income Tax Consequences."
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Agent:
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Wells Fargo Securities, LLC ("WFS"). The agent may resell the securities to other securities dealers at the original offering price of the securities less a concession not
in excess of $22.50 per security. Such securities dealers may include Wells Fargo Advisors (“WFA”) (the trade name of the retail brokerage business of our affiliates, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial
Network, LLC). In addition to the concession allowed to WFA, WFS will pay $0.75 per security of the agent’s discount to WFA as a distribution expense fee for each security sold by WFA. In addition to the forgoing, in respect of certain
securities sold in this offering, our affiliate, RBCCM, may pay a fee of up to $4.00 per security to selected securities dealers in consideration for marketing and other services in connection with the distribution of the securities to other
securities dealers.
WFS and/or RBCCM, and/or one or more of their respective affiliates expects to realize hedging profits projected by their proprietary pricing models to the extent they
assume the risks inherent in hedging our obligations under the securities. If WFS or any other dealer participating in the distribution of the securities or any of their affiliates conducts hedging activities for us in connection with the
securities, that dealer or its affiliates will expect to realize a profit projected by its proprietary pricing models from those hedging activities. Any such projected profit will be in addition to any discount, concession or fee received in
connection with the sale of the securities to you.
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Denominations:
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$1,000 and any integral multiple of $1,000.
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CUSIP:
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78016FRE6
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* |
To the extent that we make any change to the expected pricing date or expected issue date, the calculation day and stated maturity date may also be changed in our discretion to ensure that the term of the
securities remains the same.
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Additional Information about the Issuer and the Securities
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• |
Product Supplement No. WF1 dated July 6, 2022:
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• |
Prospectus Supplement dated September 14, 2021:
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• |
Prospectus dated September 14, 2021:
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Estimated Value of the Securities
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Investor Considerations
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◾ |
seek 1-to-1 exposure to the upside performance of the Index if the ending level is greater than the starting level, subject to the maximum return at maturity of at least 59.00% (to be determined on the pricing date) of the face amount;
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desire to limit downside exposure to the Index through the buffer amount;
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are willing to accept the risk that, if the ending level is less than the starting level by more than the buffer amount, they will lose some, and possibly up to 85%, of the face amount per security at maturity;
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are willing to forgo interest payments on the securities and dividends on the securities included in the Index; and
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are willing to hold the securities until maturity.
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seek a liquid investment or are unable or unwilling to hold the securities to maturity;
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are unwilling to accept the risk that the ending level of the Index may decrease from the starting level by more than the buffer amount;
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seek uncapped exposure to the upside performance of the Index;
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seek full return of the face amount of the securities at stated maturity;
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are unwilling to purchase securities with an estimated value as of the pricing date that is lower than the original offering price and that may be as low as the lower estimated value set forth on the cover page;
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seek current income;
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are unwilling to accept the risk of exposure to the Index;
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seek exposure to the Index but are unwilling to accept the risk/return trade-offs inherent in the maturity payment amount for the securities;
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are unwilling to accept the credit risk of Royal Bank of Canada to obtain exposure to the Index generally, or to the exposure to the Index that the securities provide specifically; or
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prefer the lower risk of fixed income investments with comparable maturities issued by companies with comparable credit ratings.
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Determining Payment at Stated Maturity
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Selected Risk Considerations
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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• |
Investing In The Securities Is Not The Same As Investing In The Index. Investing in the securities is not equivalent to investing in the Index. As an investor in
the securities, your return will not reflect the return you would realize if you actually owned and held the securities included in the Index for a period similar to the term of the securities because you will not receive any dividend
payments, distributions or any other payments paid on those securities. As a holder of the securities, you will not have any voting rights or any other rights that holders of the securities included in the Index would have.
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Historical Levels Of The Index Should Not Be Taken As An Indication Of The Future Performance Of The Index During The Term Of The Securities.
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Changes That Affect The Index May Adversely Affect The Value Of The Securities And The Maturity Payment Amount.
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We Cannot Control Actions By Any Of The Unaffiliated Companies Whose Securities Are Included In The Index.
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We And Our Affiliates Have No Affiliation With The Index Sponsor And Have Not Independently Verified Its Public Disclosure Of Information.
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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The calculation agent is our affiliate and may be required to make discretionary judgments that affect the return you receive on the securities. RBCCM,
which is our affiliate, will be the calculation agent for the securities. As calculation agent, RBCCM will determine any values of the Index and make any other determinations necessary to calculate any payments on the securities. In making
these determinations, RBCCM may be required to make discretionary judgments that may adversely affect any payments on the securities. See the sections entitled "General Terms of the Securities— Certain Terms for Securities Linked to an
Index—Market Disruption Events,"—Adjustments to an Index" and "—Discontinuance of an Index" in the accompanying product supplement. In making these discretionary judgments, the fact that RBCCM is our affiliate may cause it to have economic
interests that are adverse to your interests as an investor in the securities, and our determinations as calculation agent may adversely affect your return on the securities.
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The estimated value of the securities was calculated by us and is therefore not an independent third-party valuation.
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Research reports by our affiliates or any participating dealer or its affiliates may be inconsistent with an investment in the securities and may adversely affect the level of the Index.
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Business activities of our affiliates or any participating dealer or its affiliates with the companies whose securities are included in the Index may adversely affect the level of the
Index.
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Hedging activities by our affiliates or any participating dealer or its affiliates may adversely affect the level of the Index.
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Trading activities by our affiliates or any participating dealer or its affiliates may adversely affect the level of the Index.
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A participating dealer or its affiliates may realize hedging profits projected by its proprietary pricing models in addition to any selling concession and/or distribution expense fee, creating
a further incentive for the participating dealer to sell the securities to you.
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Hypothetical Examples and Returns
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Hypothetical Maximum Return:
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At least 59.00% or $590.00 per security (the lowest possible maximum return that may be determined on the pricing date)
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Hypothetical Starting Level:
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100.00
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Hypothetical Threshold Level:
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85.00 (85% of the hypothetical starting level)
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Buffer Amount:
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15%
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Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
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Hypothetical
ending level
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Hypothetical
index return(1)
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Hypothetical
maturity payment
amount per security
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Hypothetical
pre-tax total
rate of return(2)
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200.00
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100.00%
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$1,590.00
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59.00%
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175.00
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75.00%
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$1,590.00
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59.00%
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159.00
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59.00%
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$1,590.00
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59.00%
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150.00
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50.00%
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$1,500.00
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50.00%
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140.00
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40.00%
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$1,400.00
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40.00%
|
130.00
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30.00%
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$1,300.00
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30.00%
|
120.00
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20.00%
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$1,200.00
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20.00%
|
110.00
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10.00%
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$1,100.00
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10.00%
|
105.00
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5.00%
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$1,050.00
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5.00%
|
100.00
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0.00%
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$1,000.00
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0.00%
|
95.00
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-5.00%
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$1,000.00
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0.00%
|
90.00
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-10.00%
|
$1,000.00
|
0.00%
|
85.00
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-15.00%
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$1,000.00
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0.00%
|
84.00
|
-16.00%
|
$990.00
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-1.00%
|
80.00
|
-20.00%
|
$950.00
|
-5.00%
|
70.00
|
-30.00%
|
$850.00
|
-15.00%
|
60.00
|
-40.00%
|
$750.00
|
-25.00%
|
50.00
|
-50.00%
|
$650.00
|
-35.00%
|
25.00
|
-75.00%
|
$400.00
|
-60.00%
|
0.00
|
-100.00%
|
$150.00
|
-85.00%
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(1) |
The index return is equal to the percentage change from the starting level to the ending level (i.e., the ending level minus starting level, divided by
starting level).
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(2)
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The hypothetical pre-tax total rate of return is the number, expressed as a percentage, that results from comparing the maturity payment amount per security to the face amount of $1,000.
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
|
Index
|
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Hypothetical starting level:
|
100.00
|
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Hypothetical ending level:
|
105.00
|
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Hypothetical threshold level:
|
85.00
|
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Hypothetical index return
(ending level – starting level)/starting level:
|
5.00%
|
Index
|
||
Hypothetical starting level:
|
100.00
|
|
Hypothetical ending level:
|
175.00
|
|
Hypothetical threshold level:
|
85.00
|
|
Hypothetical index return
(ending level – starting level)/starting level:
|
75.00%
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
|
Index
|
||
Hypothetical starting level:
|
100.00
|
|
Hypothetical ending level:
|
95.00
|
|
Hypothetical threshold level:
|
85.00
|
|
Hypothetical index return
(ending level – starting level)/starting level:
|
-5.00%
|
Index
|
||
Hypothetical starting level:
|
100.00
|
|
Hypothetical ending level:
|
50.00
|
|
Hypothetical threshold level:
|
85.00
|
|
Hypothetical index return
(ending level – starting level)/starting level:
|
-50.00%
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
|
The S&P 500® Index
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
|
Market Linked Securities—Upside Participation to a Cap and Fixed
Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Index due November 18, 2026
|
United States Federal Tax Considerations
|
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