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Filed Pursuant to Rule 433
Registration Statement No. 333-259205
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The information in this
preliminary terms supplement is not complete and may be changed.
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Preliminary Terms Supplement
Subject to Completion:
Dated May 30, 2023
Pricing Supplement Dated May __, 2023 to the Product Prospectus Supplement, the Prospectus Supplement and the Prospectus, Each Dated September 14, 2021
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$
Barrier Income Notes Linked to the Lesser
Performing of Three Exchange Traded
Funds, Due May 30, 2025
Royal Bank of Canada
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Reference Assets
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Initial Prices*
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Barrier Prices**
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SPDR® S&P 500® ETF Trust (“SPY”)
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$420.02
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$357.02, which is 85% of its Initial Price
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Invesco QQQ Trust Series 1 ("QQQ")
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$348.40
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$296.14, which is 85% of its Initial Price
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iShares® Russell 2000 ETF ("IWM")
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$176.15
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$149.73, which is 85% of its Initial Price
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Issuer:
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Royal Bank of Canada
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Stock Exchange Listing:
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None
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Trade Date:
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May 30, 2023
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Principal Amount:
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$1,000 per Note
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Issue Date:
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June 2, 2023
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Maturity Date:
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May 30, 2025
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Initial Price:
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For each Reference Asset, its closing price on the Strike Date, as set forth in the table above.
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Final Price:
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For each Reference Asset, its closing price on the Valuation Date.
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Coupon Payments:
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The Coupon Payments will be paid in equal monthly payments, at the rate of 10.40% per annum.
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Payment at Maturity (if
held to maturity):
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We will pay you at maturity an amount based on the Final Price of the Lesser Performing Reference Asset:
For each $1,000 in principal amount, $1,000 plus the final Coupon Payment, unless the Final Price of each Reference Asset is less than its Barrier Price.
If the Final Price of each Reference Asset is less than its Barrier Price, then the investor will receive at maturity, for each $1,000 in principal amount, in addition to the final Coupon Payment,
a cash payment equal to:
$1,000 + ($1,000 x Percentage Change of the Lesser Performing Reference Asset)
Investors could lose some or all of the principal amount at maturity if the Final Price of each Reference Asset is less than its Barrier Price.
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Lesser Performing
Reference Asset:
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The Reference Asset with the lowest Percentage Change.
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CUSIP:
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78016NEA1
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Per Note
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Total
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Price to public(1)
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100.00%
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Underwriting discounts and commissions(1)
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0.30%
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Proceeds to Royal Bank of Canada
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99.70%
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Barrier Income Notes
Royal Bank of Canada
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General:
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This terms supplement relates to an offering of Barrier Income Notes (the “Notes”) linked to the lesser performing of the shares of the three exchange
traded funds (the “Reference Assets”) set forth on the cover page of this document.
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Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Strike Date:
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May 26, 2023
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Trade Date:
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May 30, 2023
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Issue Date:
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June 2, 2023
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Valuation Date:
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May 27, 2025
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Maturity Date:
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May 30, 2025
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Denominations:
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Minimum denomination of $1,000, and integral multiples of $1,000 thereafter.
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Coupon Rate:
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10.40% per annum. The Coupon Payments will be paid in equal monthly installments of approximately $8.667 per $1,000 of the principal amount on the
applicable Coupon Payment Date.
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Record Dates:
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The record date for each Coupon Payment Date will be one business day prior to that scheduled Coupon Payment Date; provided, however, that the Coupon Payment at maturity
will be payable to the person to whom the payment at maturity is payable.
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Barrier Income Notes
Royal Bank of Canada
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Coupon Payment
Dates:
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Monthly, as follows (subject to postponement as set forth in the product supplement):
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June 29, 2023
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July 31, 2023
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August 31, 2023
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September 29, 2023
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October 31, 2023
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November 30, 2023
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December 29, 2023
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January 31, 2024
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February 29, 2024
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March 29, 2024
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May 1, 2024
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May 31, 2024
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July 1, 2024
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July 31, 2024
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August 29, 2024
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October 1, 2024
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October 31, 2024
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December 2, 2024
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December 31, 2024
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January 30, 2025
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March 3, 2025
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March 31, 2025
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May 1, 2025
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May 30, 2025 (the Maturity Date)
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Percentage Change:
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With respect to each Reference Asset:
Final Price – Initial Price
Initial Price
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Lesser Performing
Reference Asset:
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The Reference Asset which has the lowest Percentage Change.
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Initial Price:
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For each Reference Asset, its closing price on the Strike Date, as set forth on the cover page of this document.
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Barrier Price:
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For each Reference Asset, 85% of its Initial Price, as set forth on the cover page of this document.
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Final Price:
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For each Reference Asset, its closing price on the Valuation Date.
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Barrier Income Notes
Royal Bank of Canada
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Payment at Maturity (if
the Notes are held to
maturity):
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We will pay you at maturity an amount based on the Final Price of the Lesser Performing Reference Asset:
• If the Final Price of the
Lesser Performing Reference Asset is greater than or equal to its Barrier Price, we will pay you a cash payment equal to the principal amount plus the Coupon Payment otherwise due on the Maturity Date.
• If the Final Price of the Lesser Performing
Reference Asset is less than its Barrier Price, you will receive at maturity, for each $1,000 in principal amount, in addition to the Coupon Payment due at maturity, a cash payment equal to:
1,000 + ($1,000 x Percentage Change of the Lesser Performing Reference Asset)
The amount of cash that you receive in this case will be less than your principal amount, if anything, resulting in a loss that is proportionate to the decline of the Lesser
Performing Reference Asset from the Strike Date to the Valuation Date. Investors in the Notes could lose some or all of their principal amount at maturity if the Final Price of the Lesser Performing
Reference Asset is less than its Barrier Price.
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Stock Settlement:
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Not applicable. Payments on the Notes will be made solely in cash.
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Monitoring Period:
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The Valuation Date. The prices of the Reference Stocks between the Strike Date and the Valuation Date will not impact the Payment at Maturity.
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Monitoring Method:
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Close of Trading Day
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Early Redemption:
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The Notes are not subject to early redemption at our option, or to an automatic redemption, prior to maturity.
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Market Disruption
Events:
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The occurrence of a market disruption event (or a non-trading day) as to any of the Reference Assets will result in the postponement of the Valuation Date as to that Reference
Asset, as described in the product prospectus supplement, but not to a non-affected Reference Asset.
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Calculation Agent:
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RBC Capital Markets, LLC (“RBCCM”)
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U.S. Tax Treatment:
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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 Notes as an investment unit consisting of (i) a non-contingent debt instrument issued by us to you and (ii) a put option with respect to the Reference Assets written by you and purchased by us.
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
our special U.S. tax counsel, Ashurst LLP) in the product prospectus supplement dated September 14, 2021 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
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Secondary Market:
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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.
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Listing:
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None. The Notes will not be listed on any securities exchange.
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Barrier Income Notes
Royal Bank of Canada
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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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Terms Incorporated in
the Master Note:
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All of the terms appearing on the cover page and on pages P-2 and P-3 of this terms supplement above the items captioned “Secondary Market,” and the
applicable terms appearing under the caption “General Terms of the Notes” in the product prospectus supplement, as modified by this terms supplement.
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Hypothetical Final
Price of the Lesser
Performing
Reference Asset
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Percentage Change
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Payment at Maturity
as Percentage of
Principal Amount
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Hypothetical
Payment at Maturity
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$150.00
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50.00%
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100.8667%
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$1,008.667
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$130.00
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30.00%
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100.8667%
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$1,008.667
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$120.00
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20.00%
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100.8667%
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$1,008.667
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$110.00
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10.00%
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100.8667%
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$1,008.667
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$100.00
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0.00%
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100.8667%
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$1,008.667
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$90.00
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-10.00%
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100.8667%
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$1,008.667
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$85.00
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-15.00%
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100.8667%
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$1,008.667
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$80.00
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-20.00%
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80.8667%
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$808.667
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$70.00
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-30.00%
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70.8667%
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$708.667
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$60.00
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-40.00%
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60.8667%
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$608.667
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$50.00
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-50.00%
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50.8667%
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$508.667
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$40.00
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-60.00%
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40.8667%
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$408.667
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$30.00
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-70.00%
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30.8667%
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$308.667
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$20.00
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-80.00%
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20.8667%
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$208.667
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$10.00
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-90.00%
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10.8667%
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$108.667
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$0.00
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-100.00%
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0.8667%
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$8.667
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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You May Lose Some or All of the Principal Amount at Maturity — Investors in the Notes could lose some or all of their principal amount if there is a decline in the closing
price of the Lesser Performing Reference Asset between the Strike Date and the Valuation Date. If the Final Price of the Lesser Performing Reference Asset on the Valuation Date is less than its Barrier Price, the amount of cash that you
receive at maturity will represent a loss of your principal that is proportionate to the decline in the closing price of the Lesser Performing Reference Asset from the Strike Date to the Valuation Date. The rate of interest payable on the
Notes may not be sufficient to compensate for any such loss.
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The Payments on the Notes Are Limited to the Coupon Payments — The return potential of the Notes is limited to the pre-specified Coupon Rate, regardless of the
appreciation of the Reference Assets. If the Final Price of the Lesser Performing Reference Asset on the Valuation Date is less than its Barrier Price, you will be subject to the full downside performance of the Lesser Performing Reference
Asset even though your potential return is limited to the Coupon Rate. As a result, the return on an investment in the Notes could be less than the return on a direct investment in the Reference Assets.
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The Amount Payable at Maturity Will Be Determined Solely by Reference to the Lesser Performing Reference Asset, Even if the Other Reference Assets Performs Better — If any
of the Reference Assets has a Final Price that is less than its Barrier Price, your return will be linked to the Lesser Performing Reference Asset. Even if the Final Prices of the other Reference Assets have increased compared to their
respective Initial Prices, or have experienced a decrease that is less than that of the Lesser Performing Reference Asset, your return will only be determined by reference to the performance of the Lesser Performing Reference Asset,
regardless of the performance of the other Reference Assets. Because each Reference Asset tracks the performance of a different segment of the U.S. securities market, they may all simultaneously decrease in value.
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Your Payment on the Notes Will Be Determined by Reference to Each Reference Asset Individually, Not to a Basket, and the Payment at Maturity Will Be Based on the Performance of
the Lesser Performing Reference Asset — The Payment at Maturity will be determined only by reference to the performance of the Lesser Performing Reference Asset, regardless of the performance of the other Reference Assets. The
Notes are not linked to a weighted basket, in which the risk may be mitigated and diversified among each of the basket components. For example, in the case of notes linked to a weighted basket, the return would depend on the weighted
aggregate performance of the basket components reflected as the basket return. As a result, the depreciation of one basket component could be mitigated by the appreciation of the other basket components, as scaled by the weighting of those
basket components. However, in the case of the Notes, the individual performance of each of the Reference Assets would not be combined, and the depreciation of one Reference Asset would not be mitigated by any appreciation of the other
Reference Assets. Instead, your return will depend solely on the Final Price of the Lesser Performing Reference Asset.
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Your Return on the Notes May Be Lower than the Return on a Conventional Debt Security of Comparable 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, your return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt
securities.
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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 each Coupon Payment and the amount due on any relevant payment date is dependent upon our ability to repay our obligations on the applicable payment dates. This will be the case even
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Barrier Income Notes
Royal Bank of Canada
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The Payment at Maturity Is Subject to Postponement due to Market Disruption Events and Adjustments — The payment at maturity 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—Consequences of
Market Disruption Events” in the product prospectus supplement.
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The Tax Treatment of the Notes Is Uncertain — The U.S. federal income tax treatment of an investment in the Notes is uncertain. We do not plan to request a ruling from the
Internal Revenue Service (the "IRS") regarding the tax treatment of an investment in the Notes, and the IRS or a court may not agree with the tax treatment described in this document.
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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.
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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 will 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 prices of the Reference Assets, 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 or
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.
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The Initial Estimated Value of the Notes Set Forth on the Cover Page of 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.
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Barrier Income Notes
Royal Bank of Canada
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Notes or to the securities
represented by the Reference Assets 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 share
prices of the Reference Assets, 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 the issuers of the securities represented by the
Reference Assets, 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 Assets or securities
represented by the Reference Assets. 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 share price or prices, as applicable, of the Reference Assets, and, therefore, the market value of the Notes.
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Owning the Notes Is Not the Same as Owning the Securities Represented by the Reference Assets — The return on your Notes is unlikely to reflect the return you would
realize if you actually owned shares of the Reference Assets or the securities represented by the Reference Assets. For instance, you will not receive or be entitled to receive any dividend payments or other distributions on these
securities during the term of your Notes. As an owner of the Notes, you will not have voting rights or any other rights that holders of these securities may have. Furthermore, the Reference Assets may appreciate substantially during the
term of the Notes, while your potential return will be limited to the applicable Coupon Payments.
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You Must Rely on Your Own Evaluation of the Merits of an Investment Linked to the Reference Assets — In the ordinary course of their business, our affiliates may have
expressed views on expected movements in the Reference Assets or the equity securities that they represent, and may do so in the future. These views or reports may be communicated to our clients and clients of our affiliates. However, these
views are subject to change from time to time. Moreover, other professionals who transact business in markets relating to any Reference Asset may at any time have significantly different views from those of our affiliates. For these
reasons, you are encouraged to derive information concerning the Reference Assets from multiple sources, and you should not rely solely on views expressed by our affiliates.
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An Investment in the Notes Is Subject to Management Risk — The Reference Assets are not managed according to traditional methods of ‘‘active’’ investment management, which
involve the buying and selling of securities based on economic, financial and market analysis and investment judgment. Instead, each Reference Asset, utilizing a ‘‘passive’’ or indexing investment approach, attempts to approximate the
investment performance of its underlying index by investing in a portfolio of securities that generally replicate its underlying index. Therefore, unless a specific security is removed from its underlying index, the Reference Asset
generally would not sell a security because the security’s issuer was in financial trouble. In addition, each Reference Asset is subject to the risk that the investment strategy of its investment advisor may not produce the intended
results.
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The Reference Assets and their Underlying Indices Are Different — The performance of each Reference Asset may not exactly replicate the performance of its respective
underlying index, because these Reference
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Barrier Income Notes
Royal Bank of Canada
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We and Our Affiliates Do Not Have Any Affiliation with the Advisors or the Sponsors of the Reference Assets or the Underlying Indices and Are Not Responsible for Their Public
Disclosure of Information — We and our affiliates are not affiliated with the investment advisor or the sponsor of any Reference Asset or their underlying indices in any way and have no
ability to control or predict their actions, including any errors in or discontinuance of disclosure regarding their methods or policies relating to the Reference Assets or the underlying indices. The investment advisors or the sponsors of
the Reference Assets and the underlying indices are not involved in the offering of the Notes in any way and have no obligation to consider your interests as an owner of the Notes in taking any actions relating to the Reference Assets that
might affect the value of the Notes. Neither we nor any of our affiliates has independently verified the adequacy or accuracy of the information about the investment advisors, the sponsors, or the Reference Assets contained in any public
disclosure of information. You, as an investor in the Notes, should make your own investigation into the Reference Assets.
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The Policies of the Reference Assets’ Investment Advisors or the Sponsors of the Underlying Indices Could Affect the Amount Payable on the Notes and Their Market Value — The
policies of the Reference Assets’ investment advisors concerning the management of the Reference Assets, or the index sponsors for each underlying index, concerning the calculation of each underlying index, additions, deletions or
substitutions of the securities held by the Reference Assets could affect the market price of shares of the Reference Assets and, therefore, the amount payable on the Notes on the maturity date and the market value of the Notes before that
date. The amount payable on the Notes and their market value could also be affected if the Reference Assets’ investment advisors or the relevant sponsors change these policies, for example, by changing the manner in which an investment
advisor manages the Reference Assets, or if a sponsor changes the manner in which it calculates the applicable index, or if a Reference Asset’s investment advisor discontinues or suspends maintenance of a Reference Asset, in which case it
may become difficult to determine the market value of the Notes. The Reference Assets’ investment advisors have no connection to the offering of the Notes and has no obligations to you as an investor in the Notes in making its decisions
regarding the Reference Assets.
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An Investment in the Notes Is Subject to Risks Associated in Investing in Stocks With a Small Market Capitalization — The IWM consists of stocks issued by companies with
relatively small market capitalizations. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the price of the IWM may be more volatile than
that of a market measure that does not track solely small-capitalization stocks. Stock prices of small-capitalization companies are also generally more vulnerable than those of large-capitalization companies to adverse business and economic
developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many investors if they do not pay dividends. In addition, small capitalization companies are often less well-
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Barrier Income Notes
Royal Bank of Canada
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• |
An Investment in the Notes Is Subject to Risks Relating to Non-U.S. Securities Markets — Because certain securities included in the
QQQ are issued by non-U.S. issuers and/or are traded outside of the U.S., an investment in the Notes involves particular risks. For example, the relevant 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.
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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Barrier Income Notes
Royal Bank of Canada
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