424B2 1 dp79886_424b2-steps9.htm FORM 424B2

 

Pricing Supplement STEPS-9
(To the Prospectus dated June 30, 2017, the Prospectus Supplement dated June 30, 2017, and the Product Supplement STEPS-1 dated August 11, 2017)		   Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-218604-02



2,151,062 Units
$10 principal amount per unit
CUSIP No. 22547V170

Pricing Date
Settlement Date
Maturity Date

August 24, 2017
August 31, 2017
September 10, 2018

       

STEP Income Securities® Linked to the Common Stock of Morgan Stanley

·     Maturity of approximately one year and two weeks

·     Interest payable quarterly at the rate of 8.00% per year

·     A payment of $0.401 per unit if the Underlying Stock increases to or above 108.00% of the Starting Value

·     1-to-1 downside exposure to decreases in the Underlying Stock, with up to 100.00% of your principal at risk

·     All payments on the notes subject to the credit risk of Credit Suisse AG

·     In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.075 per unit. See “Structuring the Notes”

·     Limited secondary market liquidity, with no exchange listing

·     The notes are senior unsecured debt securities and are not insured or guaranteed by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of the United States, Switzerland or any other jurisdiction

 

The notes are being issued by Credit Suisse AG (“Credit Suisse”). There are important differences between the notes and a conventional debt security, including different investment risks and certain additional costs. See “Risk Factors” beginning on page TS-6 of this term sheet and beginning on page PS-7 of product supplement STEPS-1.

 

The initial estimated value of the notes as of the pricing date is $9.75 per unit, which is less than the public offering price listed below. See “Summary” on the following page, “Risk Factors” beginning on page TS-6 of this term sheet and “Structuring the Notes” on page TS-11 of this term sheet for additional information. The actual value of your notes at any time will reflect many factors and cannot be predicted with accuracy.

_________________________

 

None of the Securities and Exchange Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this Note Prospectus (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.

_________________________

 

  Per Unit          Total
Public offering price(1) $ 10.000 $ 21,510,620.00
Underwriting discount $ 0.175 $ 376,435.85
Proceeds, before expenses, to Credit Suisse $ 9.825 $ 21,134,184.15

(1)Plus accrued interest from the scheduled settlement date, if settlement occurs after that date.

 

The notes: 

Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

 

Merrill Lynch & Co.

August 24, 2017

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Summary

 

The STEP Income Securities® Linked to the Common Stock of Morgan Stanley, due September 10, 2018 (the “notes”) are our senior unsecured debt securities. The notes are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other governmental agency of the United States, Switzerland or any other jurisdiction and are not secured by collateral. The notes will rank equally with all of our other unsecured and unsubordinated debt. Any payments due on the notes, including any repayment of principal, will be subject to the credit risk of Credit Suisse. The notes provide quarterly interest payments. Additionally, if the Ending Value of the Underlying Stock, which is the common stock of Morgan Stanley, is at or above the Step Level, the notes will also provide a payment of $0.401 per unit at maturity. If the Ending Value is less than the Step Level, the Redemption Amount will not be greater than your principal amount. If the Ending Value is less than the Starting Value, the Redemption Amount will be less than the principal amount of your notes, and may be as low as zero. Payments on the notes, including the amount you receive at maturity, will be calculated based on the $10 principal amount per unit and will depend on the performance of the Underlying Stock, subject to our credit risk. See “Terms of the Notes” below.

 

The economic terms of the notes (including the Step Payment) are based on the rate we are currently paying to borrow funds through the issuance of market-linked notes (our “internal funding rate”) and the economic terms of certain related hedging arrangements. Our internal funding rate for market-linked notes is typically lower than a rate reflecting the yield on our conventional debt securities of similar maturity in the secondary market (our “secondary market credit rate”). This difference in borrowing rate, as well as the underwriting discount and the hedging related charge described below, reduced the economic terms of the notes to you and the initial estimated value of the notes on the pricing date. These costs will be effectively borne by you as an investor in the notes, and will be retained by us and MLPF&S or any of our respective affiliates in connection with our structuring and offering of the notes. Due to these factors, the public offering price you pay to purchase the notes is greater than the initial estimated value of the notes.

 

On the cover page of this term sheet, we have provided the initial estimated value for the notes. This estimated value was determined based on our valuation of the theoretical components of the notes in accordance with our pricing models. These include a theoretical bond component valued using our internal funding rate, and theoretical individual option components valued using mid-market pricing. You will not have any interest in, or rights to, the theoretical components we used to determine the estimated value of the notes. For more information about the initial estimated value and the structuring of the notes, see “Structuring the Notes” on page TS-11.

 

Terms of the Notes Redemption Amount Determination
Issuer: Credit Suisse AG (“Credit Suisse”), acting through its London branch.

In addition to interest payable, on the maturity date, you will receive a cash payment per unit determined as follows:

 

 

Principal Amount: $10.00 per unit
Term: Approximately one year and two weeks
Underlying Stock: Common stock of Morgan Stanley (the “Underlying Company”) (NYSE symbol: MS)
Starting Value: 46.01 (the Volume Weighted Average Price on the pricing date).
Volume Weighted Average Price: The volume weighted average price (rounded to two decimal places) shown on page “AQR” on Bloomberg L.P. for trading in shares of the Underlying Stock taking place from approximately 9:30 a.m. to 4:02 p.m. on all U.S. exchanges.
Ending Value: The Closing Market Price of the Underlying Stock on the valuation date, multiplied by the Price Multiplier. The valuation date is subject to postponement in the event of Market Disruption Events, as described beginning on page PS-20 of product supplement STEPS-1.
Valuation Date: August 31, 2018
Interest Rate: 8.00% per year
Interest Payment Dates: December 10, 2017, March 10, 2018, June 10, 2018 and the maturity date
Step Payment: $0.401 per unit, which represents a return of 4.01% of the principal amount
Step Level: 49.69 (108% of the Starting Value, rounded to two decimal places)
Threshold Value: 46.01 (100% of the Starting Value)
Price Multiplier: 1, subject to adjustment for certain corporate events relating to the Underlying Stock described beginning on page PS-22 of product supplement STEPS-1.
Fees and Charges: The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.075 per unit described in “Structuring the Notes” on page TS-11.
Joint Calculation Agents: Credit Suisse International and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), acting jointly.

 

STEP Income Securities® TS-2

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

The terms and risks of the notes are contained in this term sheet and in the following:

 

§Product supplement STEPS-1 dated August 11, 2017:
http://www.sec.gov/Archives/edgar/data/1053092/000095010317007790/dp79443_424b2-steps1.htm

 

§Prospectus supplement and prospectus dated June 30, 2017:
http://www.sec.gov/Archives/edgar/data/1053092/000104746917004364/a2232566z424b2.htm

 

These documents (together, the “Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated above or obtained from MLPF&S by calling 1-800-294-1322. Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement STEPS-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,” or similar references are to Credit Suisse.

 

Investor Considerations

 

You may wish to consider an investment in the notes if:   The notes may not be an appropriate investment for you if:

§  You anticipate that the Ending Value will be greater than or equal to the Starting Value.

 

§  You seek interest payments on your investment.

 

§  You accept that the maximum return on the notes is limited to the sum of the quarterly interest payments and the Step Payment, if any.

 

§  You accept that your investment may result in a loss, which could be significant, if the Ending Value is below the Starting Value.

 

§  You are willing to forgo dividends or other benefits of owning shares of the Underlying Stock.

 

§  You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness, our internal funding rate and fees and charges on the notes.

 

§  You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.

  

§  You anticipate that the Ending Value will be less than the Starting Value.

 

§  You anticipate that the price of the Underlying Stock will increase substantially and do not want a payment at maturity that is limited to the Step Payment.

 

§  You seek principal repayment or preservation of capital.

 

§  In addition to interest payments, you seek an additional guaranteed return above the principal amount.

 

§  You seek to receive dividends or other distributions paid on the Underlying Stock.

 

§  You seek an investment for which there will be a liquid secondary market.

 

§  You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.

 

We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

STEP Income Securities® TS-3

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Hypothetical Payments at Maturity

 

The following examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical payments on the notes. The actual amount you receive and the resulting return will depend on the actual Starting Value, Threshold Value, Ending Value, Step Level, and term of your investment. The following examples do not take into account any tax consequences from investing in the notes. These examples are based on:

 

1)a Starting Value of 100;

2)a Threshold Value of 100;

3)a Step Level of 108;

4)the Step Payment of $0.401 per unit;

5)the term of the notes from August 31, 2017 to September 10, 2018; and

6)the interest rate of 8.00% per year.

 

The hypothetical Starting Value of 100.00 used in these examples has been chosen for illustrative purposes only. The actual Starting Value of the Underlying Stock is 46.01, which was the Volume Weighted Average Price on the pricing date. For recent actual prices of the Underlying Stock, see “The Underlying Stock” section below. In addition, all payments on the notes are subject to issuer credit risk.

 

Example 1

 

The Ending Value is 115 (115 % of the Starting Value)

 

The Ending Value is greater than the Step Level. Consequently, in addition to the quarterly interest payments, you will receive on the maturity date the principal amount of your notes plus the Step Payment of $0.401 per unit. The Redemption Amount per unit on the maturity date will therefore be equal to $10.401 per unit ($10.00 plus the Step Payment of $0.401 per unit).

 

Example 2

 

The Ending Value is 105 (105 % of the Starting Value)

 

The Ending Value is greater than the Starting Value and the Threshold Value but less than the Step Level. Consequently, you will receive the quarterly interest payments, but you will not receive the Step Payment on the maturity date. The Redemption Amount per unit on the maturity date will therefore be equal to $10.00.

 

Example 3

 

The Ending Value is 70 (70 % of the Starting Value)

 

The Ending Value is less than the Starting Value and the Threshold Value. Consequently, you will receive the quarterly interest payments, but you will not receive the Step Payment on the maturity date, and you will participate on a 1-for-1 basis in the decrease in the price of the Underlying Stock. The Redemption Amount per unit will equal:

 

 

On the maturity date, you will receive the Redemption Amount per unit of $7.00.

 

STEP Income Securities® TS-4

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Summary of the Hypothetical Examples

 

  Example 1 Example 2 Example 3
  The Ending Value is greater than or equal to the Step Level The Ending Value is less than the Step Level but greater than or equal to the Starting Value The Ending Value is less than the Starting Value and the Threshold Value
Starting Value 100.00 100.00 100.00
Ending Value 115.00 105.00 70.00
Step Level 108.00 108.00 108.00
Threshold Value 100.00 100.00 100.00
Interest Rate (per year) 8.00% 8.00% 8.00%
Step Payment $0.401 $0.00 $0.00
Redemption Amount per Unit $10.401 $10.00 $7.00
Total Return of the Underlying Stock(1) 17.13% 7.13% -27.87%
Total Return on the Notes(2) 12.23% 8.22% -21.78%

 

(1)The total return of the Underlying Stock assumes:

(a)the percentage change in the price of the Underlying Stock from the Starting Value to the Ending Value;

(b)a constant dividend yield of 2.07% per year; and

(c)no transaction fees or expenses.

(2)The total return on the notes includes interest paid on the notes from August 31, 2017 to September 10, 2018.

 

STEP Income Securities® TS-5

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Risk Factors

 

There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-7 of product supplement STEPS-1 identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

§Depending on the performance of the Underlying Stock as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.

 

§Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.

 

§Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment.

 

§You will not receive a Step Payment at maturity unless the Ending Value is greater than or equal to the Step Level.

 

§Your investment return is limited to the return represented by the periodic interest payments over the term of the notes and the Step Payment, if any, and may be less than a comparable investment directly in the Underlying Stock.

 

§The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our proprietary pricing models. These pricing models consider certain factors, such as our internal funding rate on the pricing date, interest rates, volatility and time to maturity of the notes, and they rely in part on certain assumptions about future events, which may prove to be incorrect. Because our pricing models may differ from other issuers’ valuation models, and because funding rates taken into account by other issuers may vary materially from the rates used by us (even among issuers with similar creditworthiness), our estimated value may not be comparable to estimated values of similar notes of other issuers.

 

§Our internal funding rate for market-linked notes is typically lower than our secondary market credit rates, as further described in “Structuring the Notes” on page TS-11. Because we used our internal funding rate to determine the value of the theoretical bond component, if on the pricing date our internal funding rate was lower than our secondary market credit rates, the initial estimated value of the notes is greater than if we had used our secondary market credit rates in valuing the notes.

 

§The public offering price you pay for the notes exceeds the initial estimated value. This is due to, among other transaction costs, the inclusion in the public offering price of the underwriting discount and the hedging related charge, as further described in “Structuring the Notes” on page TS-11.

 

§Assuming no change in market conditions or other relevant factors after the pricing date, the market value of your notes may be lower than the price you paid for them and lower than the initial estimated value. This is due to, among other things, the inclusion in the public offering price of the underwriting discount and the hedging related charge and the internal funding rate we used in pricing the notes, as further described in “Structuring the Notes” on page TS-11. These factors, together with customary bid ask spreads, other transaction costs and various credit, market and economic factors over the term of the notes, including changes in the price of the Underlying Stock, 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.

 

§A trading market is not expected to develop for the notes. Neither we nor MLPF&S is obligated to make a market for, or to repurchase, the notes. The initial estimated value does not represent a minimum or maximum price at which we, MLPF&S or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. MLPF&S has advised us that any repurchases by them or their affiliates will be made at prices determined by reference to their pricing models and at their discretion, and these prices will include MLPF&S’s trading commissions and mark-ups. If you sell your notes to a dealer other than MLPF&S in a secondary market transaction, the dealer may impose its own discount or commission. MLPF&S has also advised us that, at its discretion and for your benefit, assuming no changes in market conditions from the pricing date, MLPF&S may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the notes for a short initial period after the issuance of the notes. That higher price reflects costs that were included in the public offering price of the notes, and that higher price may also be initially used for account statements or otherwise. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.

 

§Our business, hedging and trading activities, and those of MLPF&S and our respective affiliates (including trades in shares of the Underlying Stock) and any hedging and trading activities we, MLPF&S or our respective affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.

 

§The Underlying Company will have no obligations relating to the notes, and neither we nor MLPF&S will perform any due diligence procedures with respect to the Underlying Company in connection with this offering.

 

§You will have no rights of a holder of the Underlying Stock, and you will not be entitled to receive shares of the Underlying Stock or dividends or other distributions by the Underlying Company.

 

§While we, MLPF&S or our respective affiliates may from time to time own securities of the Underlying Company, we, MLPF&S and our respective affiliates do not control the Underlying Company, and have not verified any disclosure made by the Underlying Company.

 

STEP Income Securities® TS-6

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

§The Redemption Amount will not be adjusted for all corporate events that could affect the Underlying Stock. See “Description of the Notes—Anti-Dilution Adjustments” beginning on page PS-22 of product supplement STEPS-1.

 

§There may be potential conflicts of interest involving the calculation agents, one of which is our affiliate and one of which is MLPF&S. We have the right to appoint and remove the calculation agents.

 

§As a Swiss bank, Credit Suisse is subject to regulation by governmental agencies, supervisory authorities and self-regulatory organizations in Switzerland. Such regulation is increasingly more extensive and complex and subjects Credit Suisse to risks. For example, pursuant to Swiss banking laws, FINMA has broad powers and discretion in the case of resolution proceedings, which include the power to convert debt instruments and other liabilities of Credit Suisse into equity and/or cancel such liabilities in whole or in part.

 

§The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Material U.S. Federal Income Tax Considerations” below and “Material U.S. Federal Income Tax Consequences” beginning on page PS-32 of product supplement STEPS-1.

 

STEP Income Securities® TS-7

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

The Underlying Stock

 

We have derived the following information from publicly available documents. We have not independently verified the accuracy or completeness of the following information. Morgan Stanley, a bank holding company, provides financial services. The company operates a securities business which serves individual and institutional investors and investment banking clients. The company also operates an asset management business.

 

Because the Underlying Stock is registered under the Securities Exchange Act of 1934, the Underlying Company is required to file periodically certain financial and other information specified by the SEC. Information provided to or filed with the SEC by the Underlying Company can be located at the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549 or through the SEC’s website at http://www.sec.gov by reference to SEC CIK number 895421.

 

This term sheet relates only to the notes and does not relate to the Underlying Stock or to any other securities of the Underlying Company. None of us, MLPF&S, or any of our respective affiliates has participated or will participate in the preparation of the Underlying Company’s publicly available documents. None of us, MLPF&S, or any of our respective affiliates has made any due diligence inquiry with respect to the Underlying Company in connection with the offering of the notes. None of us, MLPF&S, or any of our respective affiliates makes any representation that the publicly available documents or any other publicly available information regarding the Underlying Company are accurate or complete. Furthermore, there can be no assurance that all events occurring prior to the date of this term sheet, including events that would affect the accuracy or completeness of these publicly available documents that would affect the trading price of the Underlying Stock, have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning the Underlying Company could affect the price of the Underlying Stock and therefore could affect your return on the notes. The selection of the Underlying Stock is not a recommendation to buy or sell the Underlying Stock.

 

The Underlying Stock trades on the New York Stock Exchange under the symbol “MS.”

 

STEP Income Securities® TS-8

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Historical Data

 

The following table shows the quarterly high and low Closing Market Prices of the shares of the Underlying Stock on its primary exchange from the first quarter of 2008 through the pricing date. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. These historical trading prices may have been adjusted to reflect certain corporate actions such as stock splits and reverse stock splits.

 

  High ($) Low ($)
2008    
First Quarter 51.81 36.38
Second Quarter 50.65 36.07
Third Quarter 45.39 20.99
Fourth Quarter 24.42 9.20
2009    
First Quarter 25.91 13.10
Second Quarter 31.39 21.08
Third Quarter 32.98 25.50
Fourth Quarter 35.74 29.12
2010    
First Quarter 32.92 26.60
Second Quarter 31.94 23.21
Third Quarter 27.87 22.83
Fourth Quarter 27.66 24.19
2011    
First Quarter 30.99 27.11
Second Quarter 27.76 21.93
Third Quarter 24.20 13.06
Fourth Quarter 19.41 12.47
2012    
First Quarter 21.17 15.90
Second Quarter 19.81 12.36
Third Quarter 18.24 12.62
Fourth Quarter 19.27 16.09
2013    
First Quarter 24.32 19.58
Second Quarter 27.15 20.31
Third Quarter 29.02 24.04
Fourth Quarter 31.62 26.55
2014    
First Quarter 33.40 28.95
Second Quarter 32.66 28.47
Third Quarter 36.13 31.36
Fourth Quarter 39.00 32.53
2015    
First Quarter 38.71 33.77
Second Quarter 40.21 35.91
Third Quarter 40.54 31.01
Fourth Quarter 35.41 31.29
2016    
First Quarter 31.48 21.69
Second Quarter 27.78 23.61
Third Quarter 32.24 25.00
Fourth Quarter 43.73 31.73
2017    
First Quarter 46.83 41.58
Second Quarter 45.72 40.69
Third Quarter (through the pricing date) 48.31 44.68

 

This historical data on the Underlying Stock is not necessarily indicative of the future performance of the Underlying Stock or what the value of the notes may be. Any historical upward or downward trend in the price per share of the Underlying Stock during any period set forth above is not an indication that the price per share of the Underlying Stock is more or less likely to increase or decrease at any time over the term of the notes.

 

Before investing in the notes, you should consult publicly available sources for the prices and trading pattern of the Underlying Stock.

 

STEP Income Securities® TS-9

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Supplement to the Plan of Distribution

 

Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.

 

We will deliver the notes against payment therefor in New York, New York on a date that is greater than three business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes more than three business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.

 

The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account.

 

MLPF&S has advised us as follows: They or their affiliates may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices determined by reference to their pricing models and at their discretion, and these prices will include MLPF&S’s trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however, it is not obligated to engage in any such transactions. MLPF&S has informed us that at MLPF&S’s discretion and for your benefit, assuming no changes in market conditions from the pricing date, MLPF&S may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the notes for a short initial period after the issuance of the notes. Any price offered by MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Underlying Stock and the remaining term of the notes. However, none of us, MLPF&S, or any of our respective affiliates is obligated to purchase your notes at any price or at any time, and we cannot assure you that we, MLPF&S, or any of our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated value of the notes.

 

MLPF&S has informed us that, as of the date of this term sheet, it expects that if you hold your notes in a MLPF&S account, the value of the notes shown on your account statement will be based on MLPF&S’s estimate of the value of the notes if MLPF&S or another of its affiliates were to make a market in the notes, which it is not obligated to do; and that estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions, and other considerations, as mentioned above, and will include transaction costs. Any such price may be higher than or lower than the initial estimated value of the notes.

 

The distribution of the Note Prospectus in connection with these offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made available to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on the Note Prospectus for information regarding Credit Suisse or for any purpose other than that described in the immediately preceding sentence.

 

STEP Income Securities® TS-10

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Structuring the Notes

 

The notes are our debt securities, the return on which is linked to the performance of the Underlying Stock. As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. In addition, because market-linked notes result in increased operational, funding and liability management costs to us, the internal funding rate we use in pricing market-linked notes is typically lower than a rate reflecting the yield on our conventional debt securities of similar maturity in the secondary market. Because we used our internal funding rate to determine the value of the theoretical bond component, if on the pricing date our internal funding rate was lower than our secondary market credit rates, the initial estimated value of the notes is higher than if the initial estimated value was based our secondary market credit rates.

 

Payments on the notes, including the interest payments on the notes and the Redemption Amount, will be calculated based on the $10 principal amount per unit. The Redemption Amount will depend on the performance of the Underlying Stock. We are also required to make the interest payments on the notes. In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, including MLPF&S and its affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Underlying Stock, the tenor of the notes and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.

 

MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to MLPF&S from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by MLPF&S or any third party hedge providers.

 

For further information, see “Risk Factors—General Risks Relating to the Notes” beginning on page PS-7 and “Supplemental Use of Proceeds and Hedging” on page PS-17 of product supplement STEPS-1.

 

STEP Income Securities® TS-11

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Material U.S. Federal Income Tax Considerations

 

The following discussion is a brief summary of material U.S. federal income tax consequences relating to an investment in the notes. The following summary is not complete and is qualified and supplemented by, or supplements, the discussion under the section entitled “Material U.S. Federal Income Tax Considerations” beginning on page PS-32 of product supplement STEPS-1, which you should carefully review prior to investing in the notes.

 

If the notes are treated as prepaid financial contracts (and subject to the discussion under “Constructive Ownership Transaction Rules” in the accompanying product supplement), a U.S. Holder (as defined in the accompanying product supplement) should generally recognize gain or loss upon the sale, exchange or maturity of its notes in an amount equal to the difference between the amount realized at such time and the U.S. Holder’s tax basis in its notes (generally the amount paid for the notes). Such gain or loss will be long-term capital gain or loss in the case of a U.S. Holder that has held the note for more than one year at settlement or maturity and short-term capital gain or loss otherwise. Any coupon payment received in respect of a note will be treated as ordinary income includible in a U.S. Holder’s income in accordance with such holder’s method of accounting.

 

Substitute Dividend and Dividend Equivalent Payments

 

Based on the terms of the notes and representations provided by us, our counsel is of the opinion that a note (exclusive of any other transactions that may be combined with the note as discussed in the product supplement) should not be a “delta-one transaction” with respect to a specified ELI or specified NPC within the meaning of the regulations and Notice 2017-42 and, as a result, we do not intend to treat the note as a section 871(m) transaction. If withholding applies, we will not be required to pay any additional amounts with respect to amounts withheld.

 

Validity of the Notes

 

In the opinion of Davis Polk & Wardwell LLP, as United States counsel to Credit Suisse, when the notes offered by this term sheet have been executed and issued by Credit Suisse and authenticated by the trustee pursuant to the indenture, and delivered against payment therefor, such notes will be valid and binding obligations of Credit Suisse, enforceable against Credit Suisse in accordance with their terms, subject to (i) applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, (ii) possible judicial or regulatory actions giving effect to governmental actions or foreign laws affecting creditors’ rights and (iii) concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date of this term sheet and is limited to the laws of the State of New York, except that such counsel expresses no opinion as to the application of state securities or Blue Sky laws to the notes. Insofar as this opinion involves matters governed by Swiss law, Davis Polk & Wardwell LLP has relied, without independent inquiry or investigation, on the opinion of Homburger AG, dated July 31, 2017 and filed by Credit Suisse as an exhibit to a Current Report on Form 6-K on July 31, 2017. The opinion of Davis Polk & Wardwell LLP is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in the opinion of Homburger AG. In addition, the opinion of Davis Polk & Wardwell LLP is subject to customary assumptions about the establishment of the terms of the notes, the trustee’s authorization, execution and delivery of the indenture and its authentication of the notes, and the validity, binding nature and enforceability of the indenture with respect to the trustee, all as stated in the opinion of Davis Polk & Wardwell LLP dated July 31, 2017, which was filed by Credit Suisse as an exhibit to a Current Report on Form 6-K on July 31, 2017. Davis Polk & Wardwell LLP expresses no opinion as to waivers of objections to venue, the subject matter or personal jurisdiction of a United States federal court or the effectiveness of service of process other than in accordance with applicable law. In addition, such counsel notes that the enforceability in the United States of Section 10.08(c) of the indenture is subject to the limitations set forth in the United States Foreign Sovereign Immunities Act of 1976.


STEP Income Securities® TS-12

STEP Income Securities®
Linked to the Common Stock of  Morgan Stanley, due September 10, 2018

 

Where You Can Find More Information

 

We have filed a registration statement (including a product supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S toll-free at 1-800-294-1322.

 

“STEP Income Securities®” and “STEPS®” are registered service marks of Bank of America Corporation, the parent company of MLPF&S.

 

STEP Income Securities® TS-13