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, the Prospectus Supplement
and the Prospectus Each Dated September 14, 2021
|
$
Buffered Absolute Return Notes Linked to the EURO
STOXX 50® Index, Due April 28, 2028
Royal Bank of Canada
|
||
Reference Asset
|
Initial Level*
|
Buffer Level
|
||
EURO STOXX 50® Index (“SX5E”)
|
70% 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 28, 2028
|
Valuation Date:
|
April 25, 2028
|
Upside Leverage Factor:
|
[125%-135%] (to be determined 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 the Initial Level, then the investor will receive a return equal to the principal amount multiplied by the Percentage Change (as defined below) multiplied by the Upside
Leverage Factor.
If the Final Level is less than or equal to the Initial Level, but greater than or equal to the Buffer Level, then the investor will receive a one-for-one positive return equal to the absolute value of the
Percentage Change.
If the Final Level is less than the Buffer Level, investors are subject to one-for-one loss of the principal amount for any decrease in the level of the Reference Asset by more than 30%. An investor could lose a significant portion (up to 70%) of the principal amount of the Notes.
|
||
Interest Payments:
|
None
|
||
CUSIP:
|
78016HX70
|
Per Note
|
Total
|
||
Price to public(1)
|
100.00%
|
$
|
|
Underwriting discounts and commissions(1)
|
3.25%
|
$
|
|
Proceeds to Royal Bank of Canada
|
96.75%
|
$
|
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
General:
|
This terms supplement relates to an offering of Buffered Absolute Return Notes linked to the Reference Asset (the “Notes”).
|
Issuer:
|
Royal Bank of Canada (“Royal Bank”)
|
Trade Date (Pricing
Date):
|
April 25, 2023
|
Issue Date:
|
April 28, 2023
|
Valuation Date:
|
April 25, 2028
|
Maturity Date:
|
April 28, 2028
|
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.
|
Buffer Level:
|
70% of the Initial Level.
|
Buffer Percentage:
|
30%
|
Payment at Maturity (if
held to maturity):
|
We will pay you at maturity an amount based on the Final Level:
If the Final Level is greater than the Initial Level, then the investor will receive, for each $1,000 in principal amount of the Notes:
Principal Amount + (Principal Amount x Percentage Change x Upside Leverage Factor)
If the Final Level is less than or equal to the Initial Level, but greater than or equal to the Buffer Level, the investor will
receive, for each $1,000 in principal amount of the Notes, a one-for-one positive return equal to the absolute value of the Percentage Change, calculated as follows:
$1,000 + [-1 x ($1,000 x Percentage Change)]
In this case, you will receive a positive return on the Notes if the Percentage Change is negative.
If the Final Level is less than the Buffer Level, then the investor will receive, for each $1,000 in principal amount of the Notes:
$1,000 + [$1,000 x (Percentage Change + Buffer Percentage)]
In this case, you may lose a substantial portion (up to 70%) of the principal amount.
|
Percentage Change:
|
Final Level – Initial Level
Initial Level |
Upside Leverage
Factor:
|
[125%-135%] (to be determined on the Trade Date)
|
Calculation Agent:
|
RBC Capital Markets, LLC (“RBCCM”)
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
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 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 the Notes prior to maturity may be less than the principal amount.
|
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 captions “General Terms of the Notes” and “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the product prospectus supplement dated September 14, 2021, as modified by this terms supplement.
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
Hypothetical Initial Level:
|
1,000.00*
|
Hypothetical Buffer Level:
|
700.00, which is 70.00% of the hypothetical Initial
Level
|
Hypothetical Upside Leverage Factor:
|
130%, which is the midpoint of the range set forth
above.
|
Principal Amount:
|
$1,000 per Note
|
Hypothetical Final Level
|
Redemption Amount as
Percentage of Principal Amount
|
Redemption Amount
per $1,000 in Principal
Amount
|
1,600.00
|
178.00%
|
$1,780.00
|
1,500.00
|
165.00%
|
$1,650.00
|
1,400.00
|
152.00%
|
$1,520.00
|
1,300.00
|
139.00%
|
$1,390.00
|
1,200.00
|
126.00%
|
$1,260.00
|
1,100.00
|
113.00%
|
$1,130.00
|
1,000.00
|
100.00%
|
$1,000.00
|
950.00
|
105.00%
|
$1,050.00
|
900.00
|
110.00%
|
$1,100.00
|
800.00
|
120.00%
|
$1,200.00
|
700.00
|
130.00%
|
$1,300.00
|
600.00
|
90.00%
|
$900.00
|
500.00
|
80.00%
|
$800.00
|
400.00
|
70.00%
|
$700.00
|
300.00
|
60.00%
|
$600.00
|
200.00
|
50.00%
|
$500.00
|
100.00
|
40.00%
|
$400.00
|
0.00
|
30.00%
|
$300.00
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
Example 1—
|
Calculation of the Payment at Maturity where the Percentage Change is positive.
|
|
Percentage Change:
|
10%
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x 10% x 130%) = $1,000 + $130 = $1,130
|
|
In this case, on a $1,000 investment, a 10% Percentage Change results in a Payment at Maturity of $1,130, a 13.00% return on the Notes.
|
Example 2—
|
Calculation of the Payment at Maturity where the Percentage Change is negative, but the Final Level is greater than the Buffer Level.
|
|
Percentage Change:
|
-10%
|
|
Payment at Maturity:
|
$1,000 + [-1 x ($1,000 x -10%)] = $1,000 + $100 = $1,100
|
|
In this case, on a $1,000 investment, a -10% Percentage Change results in a Payment at Maturity of $1,100, a 10% return on the Notes.
In this case, even though the Percentage Change is negative, you will receive a positive return equal to the absolute value of the Percentage Change.
|
Example 3—
|
Calculation of the Payment at Maturity where the Percentage Change is negative, and the Final Level is less than the Buffer Level.
|
|
Percentage Change:
|
-40%
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x (-40% + 30%)) = $1,000 - $100 = $900
|
|
In this case, on a $1,000 investment, a -40% Percentage Change results in a Payment at Maturity of $900, a -10% return on the Notes.
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
• |
You May Not Receive the Full Principal Amount at Maturity – Investors in the Notes will lose a substantial portion of their principal amount if the Final Level is less
than the Buffer Level. In such a case, you will lose 1% of the principal amount of the Notes for each 1% that the Final Level is less than the Buffer 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. Even if your return is positive, the return 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 or decreases 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 the 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 the 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 the Notes to maturity.
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
• |
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.
|
• |
An Investment in the Notes Is Subject to Risks Relating to Non-U.S. Securities Markets — Because foreign companies or foreign
equity securities included in the Reference Asset are publicly traded in the applicable foreign countries and are denominated in euro, an investment in the Notes involves particular risks. For example, the non-U.S. securities markets may
be more volatile than the U.S. securities markets, and market developments may affect these markets differently from the U.S. or other securities markets. Direct or indirect government intervention to stabilize the securities markets
outside the U.S., as well as cross-shareholdings in certain companies, may affect trading prices and trading volumes in those markets. Also, the public availability of information concerning the foreign issuers may vary depending on their
home jurisdiction and the reporting requirements imposed by their respective regulators. In addition, the foreign issuers may be subject to accounting, auditing and financial reporting standards and requirements that differ from those
applicable to U.S. reporting companies.
|
• |
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 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.
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
SX5E =
|
Free float market capitalization of the SX5E
|
|
Divisor
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
• |
sponsor, endorse, sell, or promote the Notes;
|
• |
recommend that any person invest in the Notes offered hereby or any other securities;
|
• |
have any responsibility or liability for or make any decisions about the timing, amount, or pricing of the Notes;
|
• |
have any responsibility or liability for the administration, management, or marketing of the Notes; or
|
• |
consider the needs of the Notes or the holders of the Notes in determining, composing, or calculating the SX5E, or have any obligation to do so.
|
• |
STOXX does not make any warranty, express or implied, and disclaims any and all warranty concerning:
|
• |
the results to be obtained by the Notes, the holders of the Notes or any other person in connection with the use of the SX5E and the data included in the SX5E;
|
• |
the accuracy or completeness of the SX5E and its data;
|
• |
the merchantability and the fitness for a particular purpose or use of the SX5E and its data;
|
• |
STOXX will have no liability for any errors, omissions, or interruptions in the SX5E or its data; and
|
• |
Under no circumstances will STOXX be liable for any lost profits or indirect, punitive, special, or consequential damages or losses, even if STOXX knows that they might occur.
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|
|
|
Buffered Absolute Return Notes
Royal Bank of Canada
|