Pricing Supplement MITTS-3 (To the Prospectus dated June 30, 2017, the Prospectus Supplement dated June 30, 2017, and the Product Supplement EQUITY INDICES MITTS-1 dated June 3, 2019) |
Filed Pursuant to Rule 424(b)(2)/424(b)(8) Registration Statement No. 333-218604-02
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$10 principal amount per unit CUSIP No. 22548Y124
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Settlement Date Maturity Date |
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Market Index Target-Term Securities®
Linked to
§ Maturity of approximately six years § 100% participation in increases in the Index, subject to a capped return of 41% § If the Index is flat or decreases, payment at maturity will be the principal amount § All payments occur at maturity and are subject to the credit risk of Credit Suisse AG § No periodic interest payments § 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”), acting through its London branch. 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-6 of product supplement EQUITY INDICES MITTS-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.
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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.
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| Per Unit | Total | |
| Public offering price | $ 10.00 | $ 8,161,830.00 |
| Underwriting discount | $ 0.25 | $ 204,045.75 |
| Proceeds, before expenses, to Credit Suisse | $ 9.75 | $ 7,957,784.25 |
The notes:
| Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
BofA Merrill Lynch
June 27, 2019
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
Summary
The Market Index Target-Term Securities® Linked to the Dow Jones Industrial Average®, due June 27, 2025 (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 you with 100% participation in increases in the Market Measure, which is the Dow Jones Industrial Average® (the “Index”), subject to a cap. If the Index decreases, you will only receive the principal amount of your notes. Any payments on the notes will be calculated based on the $10 principal amount per unit and will depend on the performance of the Index, subject to our credit risk. See “Terms of the Notes” below.
The economic terms of the notes (including the Capped Value) 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 BofAS 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. |
On the maturity date, you will receive a cash payment per unit determined as follows:
You will receive the Minimum Redemption Amount per unit of $10.00
(The Redemption Amount cannot be less than the Minimum Redemption Amount per unit.)
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| Principal Amount: | $10.00 per unit | |
| Term: | Approximately six years | |
| Market Measure: | The Dow Jones Industrial Average® (Bloomberg symbol: “INDU”), a price return index | |
| Starting Value: | 26,526.58 | |
| Ending Value: | The average of the closing levels of the Market Measure on each calculation day occurring during the Maturity Valuation Period. The scheduled calculation days are subject to postponement in the event of Market Disruption Events, as described on page PS-19 of product supplement EQUITY INDICES MITTS-1. | |
| Minimum Redemption Amount: | $10.00 per unit. If you sell your notes before the maturity date, you may receive less than the Minimum Redemption Amount per unit. | |
| Participation Rate: | 100% | |
| Capped Value: | $14.10 per unit of the notes, which represents a return of 41% over the principal amount. | |
| Maturity Valuation Period: | June 18, 2025, June 19, 2025, June 20, 2025, June 23, 2025 and June 24, 2025 | |
| Fees and Charges: | The underwriting discount of $0.25 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 BofA Securities, Inc. (“BofAS”), acting jointly. | |
| TS-2 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
The terms and risks of the notes are contained in this term sheet and in the following:
| § | Product supplement EQUITY INDICES MITTS-1 dated June 3, 2019: https://www.sec.gov/Archives/edgar/data/1053092/000095010319007512/dp107849_424b2-mitts.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 Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”) or BofAS 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 EQUITY INDICES MITTS-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:
| § | You anticipate that the Index will increase moderately from the Starting Value to the Ending Value. |
| § | You accept that the return on the notes will be zero if the Index does not increase from the Starting Value to the Ending Value. |
| § | You accept that the return on the notes will be capped. |
| § | You are willing to forgo the interest payments that are paid on traditional interest bearing debt securities. |
| § | You are willing to forgo dividends or other benefits of owning the stocks included in the Index. |
| § | You are willing to accept a limited market 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. |
The notes may not be an appropriate investment for you if:
| § | You believe that the Index will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return. |
| § | You seek a guaranteed return beyond the Minimum Redemption Amount. |
| § | You seek an uncapped return on your investment. |
| § | You seek interest payments or other current income on your investment. |
| § | You want to receive dividends or other distributions paid on the stocks included in the Index. |
| § | 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.
| TS-3 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
Hypothetical Payout Profile and Examples of
Payments at Maturity
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Market Index Target-Term Securities®
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This graph reflects the returns on the notes, based on the Participation Rate of 100%, the Minimum Redemption Amount of $10.00 and the Capped Value of $14.10. The blue line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the stocks included in the Index, excluding dividends.
This graph has been prepared for purposes of illustration only. See below table for a further illustration of the range of hypothetical payments at maturity. |
Hypothetical Payments at Maturity
The following table and examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. The actual amount you receive and the resulting total rate of return will depend on the actual Starting Value, Ending Value, Capped Value and term of your investment.
The following table is based on a hypothetical Starting Value of 100, the Participation Rate of 100% and the Capped Value of $14.10. It illustrates the effect of a range of Ending Values on the Redemption Amount per unit of the notes and the total rate of return to holders of the notes. The following examples do not take into account any tax consequences from investing in the notes.
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Ending Value |
Percentage Change from the Starting Value to the Ending Value |
Redemption Amount per Unit |
Total Rate of Return on the Notes |
| 0.00 | -100.00% | $10.00 | 0.00% |
| 70.00 | -30.00% | $10.00 | 0.00% |
| 80.00 | -20.00% | $10.00 | 0.00% |
| 90.00 | -10.00% | $10.00 | 0.00% |
| 95.00 | -5.00% | $10.00 | 0.00% |
| 100.00(1) | 0.00% | $10.00(2) | 0.00% |
| 105.00 | 5.00% | $10.50 | 5.00% |
| 110.00 | 10.00% | $11.00 | 10.00% |
| 120.00 | 20.00% | $12.00 | 20.00% |
| 130.00 | 30.00% | $13.00 | 30.00% |
| 140.00 | 40.00% | $14.00 | 40.00% |
| 141.00 | 41.00% | $14.10(3) | 41.00% |
| 150.00 | 50.00% | $14.10 | 41.00% |
| 160.00 | 60.00% | $14.10 | 41.00% |
| 170.00 | 70.00% | $14.10 | 41.00% |
| (1) | The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only. The actual Starting Value is 26,526.58, which was the closing level of the Market Measure on the pricing date. |
| (2) | The Redemption Amount per unit will not be less than the Minimum Redemption Amount. |
| (3) | The Redemption Amount per unit cannot exceed the Capped Value. |
For recent actual levels of the Market Measure, see “The Index” section below. The Index is a price return index and as such the Ending Value will not include any income generated by dividends paid on the stocks included in the Index, which you would otherwise be entitled to receive if you invested in those stocks directly. In addition, all payments on the notes are subject to issuer credit risk.
| TS-4 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
Redemption Amount Calculation Examples
| Example 1 | |
| The Ending Value is 90.00, or 90.00% of the Starting Value: | |
| Starting Value: | 100.00 |
| Ending Value: | 90.00 |
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= $9.00 Redemption Amount per unit, however, because the Redemption Amount for the notes cannot be less than the Minimum Redemption Amount, the Redemption Amount will be $10.00 per unit. |
| Example 2 | |
| The Ending Value is 130.00, or 130.00% of the Starting Value: | |
| Starting Value: | 100.00 |
| Ending Value: | 130.00 |
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= $13.00 Redemption Amount per unit |
| Example 3 | |
| The Ending Value is 180.00, or 180.00% of the Starting Value: | |
| Starting Value: | 100.00 |
| Ending Value: | 180.00 |
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= $18.00 Redemption Amount per unit, however because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $14.10 per unit. |
| TS-5 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
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-6 of product supplement EQUITY INDICES MITTS-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 Index as measured shortly before the maturity date, you may not earn a return on your investment. |
| § | 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. |
| § | Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the stocks included in the Index. |
| § | 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 use our internal funding rate to determine the value of the theoretical bond component, if on the pricing date our internal funding rate is lower than our secondary market credit rates, the initial estimated value of the notes will be 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 level of the Index, 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. None of us, MLPF&S or BofAS 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, BofAS or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. BofAS 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 and BofAS’s trading commissions and mark-ups. If you sell your notes to a dealer other than MLPF&S or BofAS in a secondary market transaction, the dealer may impose its own discount or commission. BofAS has also advised us that, at MLPF&S’s and BofAS’s discretion and for your benefit, assuming no changes in market conditions from the pricing date, MLPF&S or BofAS 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, BofAS and our respective affiliates (including trading in shares of companies included in the Index), and any hedging and trading activities we, MLPF&S, BofAS 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 Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests. |
| § | You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities. |
| § | While we, MLPF&S, BofAS or our respective affiliates may from time to time own securities of companies included in the Index, we, MLPF&S, BofAS and our respective affiliates do not control any company included in the Index, and have not verified any disclosure made by any other company. |
| § | There may be potential conflicts of interest involving the calculation agents, one of which is our affiliate and one of which is BofAS. 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. |
| TS-6 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
| § | THE U.S. FEDERAL TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARE UNCLEAR – There is no direct legal authority regarding the proper U.S. federal tax treatment of the notes, and we do not plan to request a ruling from the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of the notes are uncertain, and the IRS or a court might not agree with the treatment of the notes as prepaid financial contracts that are treated as “open transactions.” If the IRS were successful in asserting an alternative treatment of the notes, the tax consequences of the ownership and disposition of the notes, including the timing and character of income recognized by U.S. investors and the withholding tax consequences to non-U.S. investors, might be materially and adversely affected. Moreover, future legislation, Treasury regulations or IRS guidance could adversely affect the U.S. federal tax treatment of the notes, possibly retroactively. |
| TS-7 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
The Index
All disclosures contained in this term sheet regarding the Index, including, without limitation, its make-up, method of calculation, and changes in its components, have been derived from publicly available sources. The information reflects the policies of Dow Jones Indexes, the marketing name of S&P Dow Jones Indices LLC (the “Index sponsor”), and is subject to change by Dow Jones Indexes. Dow Jones Indexes has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of the Index sponsor discontinuing publication of the Index are discussed in the section entitled “Description of MITTS — Discontinuance of an Index” beginning on page PS-20 of product supplement EQUITY INDICES MITTS-1. None of us, the calculation agents, MLPF&S, or BofAS accepts any responsibility for the calculation, maintenance or publication of the Index or any successor index.
Publication of the Index
Unless otherwise stated, all information on the Index provided in this term sheet is derived from Dow Jones Indexes, the marketing name and a licensed trademark of CME Indexes. The Index is a price-weighted index, which means an underlying stock’s weight in the Index is based on its price per share rather than the total market capitalization of the issuer. The Index is designed to provide an indication of the composite performance of 30 common stocks of corporations representing a broad cross-section of U.S. industry. The corporations represented in the Index tend to be market leaders in their respective industries and their stocks are typically widely held by individuals and institutional investors.
The Index is maintained by an Averages Committee comprised of the Managing Editor of The Wall Street Journal (“WSJ”), the head of Dow Jones Indexes research and the head of CME Group Inc. research. The Averages Committee was created in March 2010, when Dow Jones Indexes became part of CME Group Index Services, LLC, a joint venture company owned 90% by CME Group Inc. and 10% by Dow Jones & Company. Generally, composition changes occur only after mergers, corporate acquisitions or other dramatic shifts in a component's core business. When such an event necessitates that one component be replaced, the entire Index is reviewed. As a result, when changes are made they typically involve more than one component. While there are no rules for component selection, a stock typically is added only if it has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the sector(s) covered by the average.
Changes in the composition of the Index are made entirely by the Averages Committee without consultation with the corporations represented in the Index, any stock exchange, any official agency or us. Unlike most other indices, which are reconstituted according to a fixed review schedule, constituents of the Index are reviewed on an as-needed basis. Changes to the common stocks included in the Index tend to be made infrequently, and the underlying stocks of the Index may be changed at any time for any reason. The companies currently represented in the Index are incorporated in the United States and its territories and their stocks are listed on the New York Stock Exchange and Nasdaq.
The Index initially consisted of 12 common stocks and was first published in the WSJ in 1896. The Index was increased to include 20 common stocks in 1916 and to 30 common stocks in 1928. The number of common stocks in the Index has remained at 30 since 1928, and, in an effort to maintain continuity, the constituent corporations represented in the Index have been changed on a relatively infrequent basis.
Computation of the Index
The level of the Index is the sum of the primary exchange prices of each of the 30 component stocks included in the Index, divided by a divisor that is designed to provide a meaningful continuity in the level of the Index. Because the Index is price-weighted, stock splits or changes in the component stocks could result in distortions in the Index level. In order to prevent these distortions related to extrinsic factors, the divisor is periodically changed in accordance with a mathematical formula that reflects adjusted proportions within the Index. The current divisor of the Index is published daily in the WSJ and other publications. In addition, other statistics based on the Index may be found in a variety of publicly available sources.
| TS-8 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
The following graph shows the daily historical performance of the Index in the period from January 1, 2008 through June 27, 2019. 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. On the pricing date, the closing level of the Index was 26,526.58.
Historical Performance of the Index
This historical data on the Index is not necessarily indicative of the future performance of the Index or what the value of the notes may be. Any historical upward or downward trend in the level of the Index during any period set forth above is not an indication that the level of the Index 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 levels of the Index.
License Agreement
“Dow Jones Industrial Average®” is a service mark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and has been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Credit Suisse.
The notes are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices make no representation or warranty, express or implied, to the owners of the notes or any member of the public regarding the advisability of investing in securities generally or in the notes particularly or the ability of the Index to track general market performance. S&P Dow Jones Indices’ only relationship to the licensee with respect to the Index is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its third party licensors. The Index is determined, composed and calculated by S&P Dow Jones Indices without regard to the licensee or the notes. S&P Dow Jones Indices have no obligation to take the licensee’s needs or the needs of the owners of the notes into consideration in determining, composing or calculating the Index. S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices, and amount of the notes or the timing of the issuance or sale of the notes or in the determination or calculation of the equation by which the notes are to be converted into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration, marketing or trading of the notes. There is no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within the Index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently issue and/or sponsor financial products unrelated to the notes currently being issued by the licensee, but which may be similar to and competitive with the notes. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the Index. It is possible that this trading activity will affect the value of the Index and the notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P
| TS-9 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND THE LICENSEE, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
| TS-10 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
Supplement to the Plan of Distribution
Under our distribution agreement with BofAS, BofAS 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. BofAS has informed us that MLPF&S will purchase the notes from BofAS for resale, and will receive a selling concession in connection with the sale of the notes in an amount up to the full amount of underwriting discount set forth on the cover of this term sheet.
We will deliver the notes against payment therefor in New York, New York on a date that is greater than two 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 two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than two business days from the pricing date, purchasers who wish to trade the notes more than two 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 and/or one of its affiliates acting as a principal in effecting the transaction for your account.
BofAS 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 and BofAS’s trading commissions and mark-ups or mark-downs. MLPF&S and BofAS may act as principal or agent in these market-making transactions; however, neither is obligated to engage in any such transactions. BofAS has informed us that at MLPF&S’s and BofAS’S discretion and for your benefit, assuming no changes in market conditions from the pricing date, MLPF&S and BofAS 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 or BofAS for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Index and the remaining term of the notes. However, none of us, MLPF&S, BofAS, nor 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, BofAS, or any of our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated value of the notes.
BofAS has informed us that, as of the date of this term sheet, it expects that if you hold your notes in a BofAS account, the value of the notes shown on your account statement will be based on BofAS’s estimate of the value of the notes if BofAS 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 BofAS 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.
Structuring the Notes
The notes are our debt securities, the return on which is linked to the performance of the Index. 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 use our internal funding rate to determine the value of the theoretical bond component, if on the pricing date our internal funding rate is lower than our secondary market credit rates, the initial estimated value of the notes will be higher than if the initial estimated value was based our secondary market credit rates.
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 Index. 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 BofAS or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, including BofAS and its affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Index, 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.
BofAS 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 BofAS 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 BofAS or any third party hedge providers.
For further information, see “Risk Factors—General Risks Relating to MITTS” beginning on page PS-6 and “Supplemental Use of Proceeds and Hedging” on page PS-16 of product supplement EQUITY INDICES MITTS-1.
| TS-11 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
United States Federal Tax Considerations
This discussion supplements and, to the extent inconsistent therewith, supersedes the discussion in the accompanying product supplement under “United States Federal Tax Considerations.”
In the opinion of our counsel, Davis Polk & Wardwell LLP, the MITTS should be treated as “contingent payment debt instruments” for U.S. federal income tax purposes, as described in the section of the accompanying product supplement called “United States Federal Tax Considerations—Tax Consequences to U.S. Holders—MITTS Treated as Debt,” and the remaining discussion assumes that this treatment of the MITTS is respected.
If you are a U.S. Holder, you will be required to recognize interest income during the term of the MITTS at the “comparable yield,” which generally is the yield at which we could issue a fixed-rate debt instrument with terms similar to those of the MITTS, including the level of subordination, term, timing of payments and general market conditions, but excluding any adjustments for the riskiness of the contingencies or the liquidity of the MITTS. We are required to construct a “projected payment schedule” in respect of the MITTS representing a payment the amount and timing of which would produce a yield to maturity on the MITTS equal to the comparable yield. Assuming you hold the MITTS until their maturity, the amount of interest you include in income based on the comparable yield in the taxable year in which the MITTS mature will be adjusted upward or downward to reflect the difference, if any, between the actual and projected payment on the MITTS at maturity as determined under the projected payment schedule.
Upon the sale, exchange or retirement of the MITTS prior to maturity, you generally will recognize gain or loss equal to the difference between the proceeds received and your adjusted tax basis in the MITTS. Your adjusted tax basis will equal your purchase price for the MITTS, increased by interest previously included in income on the MITTS. Any gain generally will be treated as ordinary income, and any loss generally will be treated as ordinary loss to the extent of prior interest inclusions on the MITTS and as capital loss thereafter.
We have determined that the comparable yield for a MITTS is a rate of 2.07%, compounded semi-annually, and that the projected payment schedule with respect to a MITTS is as follows:
| Payment Dates | Projected payment (per $10) | OID deemed to accrue during accrual period (per $10) | Total OID deemed to have accrued from original issue date as of end of accrual period |
| December 27, 2019 | $0.00 | $.10 | $.10 |
| June 27, 2020 | $0.00 | $.10 | $.20 |
| December 27, 2020 | $0.00 | $.11 | $.31 |
| June 27, 2021 | $0.00 | $.11 | $.42 |
| December 27, 2021 | $0.00 | $.11 | $.53 |
| June 27, 2022 | $0.00 | $.11 | $.64 |
| December 27, 2022 | $0.00 | $.11 | $.75 |
| June 27, 2023 | $0.00 | $.11 | $.86 |
| December 27, 2023 | $0.00 | $.11 | $.97 |
| June 27, 2024 | $0.00 | $.11 | $1.08 |
| December 27, 2024 | $0.00 | $.11 | $1.19 |
| June 27, 2025 | $11.31 | $.12 | $1.31 |
Neither the comparable yield nor the projected payment schedule constitutes a representation by us regarding the actual amount that we will pay on the MITTS.
Non-U.S. Holders. Subject to the discussions in the next paragraph and in “United States Federal Tax Considerations” in the accompanying product supplement if you are a Non-U.S. Holder (as defined in the accompanying product supplement) of the MITTS, you generally will not be subject to U.S. federal withholding or income tax in respect of any amount paid to you with respect to the MITTS, provided that (i) income in respect of the MITTS is not effectively connected with your conduct of a trade or business in the United States, and (ii) you comply with the applicable certification requirements. See “United States Federal Tax Considerations—Tax Consequences to Non-U.S. Holders” in the accompanying product supplement for a more detailed discussion of the rules applicable to Non-U.S. Holders of the MITTS.
| TS-12 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
As discussed under “United States Federal Tax Considerations—Tax Consequences to Non-U.S. Holders—Possible Withholding Under Section 871(m) of the Code” in the accompanying product supplement, Section 871(m) of the Internal Revenue Code generally imposes a 30% withholding tax on “dividend equivalents” paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities. Treasury regulations under Section 871(m), as modified by an Internal Revenue Service (the “IRS”) notice, exclude from their scope financial instruments issued prior to January 1, 2021 that do not have a “delta” of one with respect to any U.S. equity. Based on the terms of the MITTS and representations provided by us, our counsel is of the opinion that the MITTS should not be treated as transactions that have a “delta” of one within the meaning of the regulations with respect to any U.S. equity and, therefore, should not be subject to withholding tax under Section 871(m).
A determination that the MITTS are not subject to Section 871(m) is not binding on the IRS, and the IRS may disagree with this determination. Moreover, Section 871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions with respect to a U.S. equity to which the MITTS relate. You should consult your tax advisor regarding the potential application of Section 871(m) to the MITTS.
We will not be required to pay any additional amounts with respect to U.S. federal withholding taxes.
You should read the section entitled “United States Federal Tax Considerations” in the accompanying product supplement.
You should also consult your tax advisor regarding all aspects
of the U.S. federal income and estate tax consequences of an investment in the MITTS and any tax consequences arising under the
laws of any state, local or non-U.S. taxing jurisdiction.
| TS-13 |
Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due June 27, 2025
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 June 17, 2019 and filed by Credit Suisse as an exhibit to a Current Report on Form 6-K on June 17, 2019. 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 June 17, 2019, which was filed by Credit Suisse as an exhibit to a Current Report on Form 6-K on June 17, 2019. 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.
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 or BofAS toll-free at 1-800-294-1322.
“Market Index Target-Term Securities®” and “MITTS®” are registered service marks of Bank of America Corporation, the parent company of MLPF&S and BofAS.
| TS-14 |