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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 September 22, 2023
Pricing Supplement Dated September __, 2023 to the Product Prospectus Supplement ERN-EI-1, Prospectus Supplement
and Prospectus, Each Dated September 14, 2021
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$
Buffered Digital Notes
Linked to the S&P 500® Index,
Due September 24, 2026
Royal Bank of Canada
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Reference Asset
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Initial Level*
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Buffer Level
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S&P 500® Index (“SPX”)
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4,330.00
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3,593.90, which is 83.00% of its Initial Level
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If the Final Level of the Reference Asset is greater than or equal to the Buffer Level, the Notes provide a fixed payment of 127.00% of the principal amount ($1,270.00 per $1,000 in principal amount).
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If the Final Level of the Reference Asset is less than the Buffer Level, investors will lose 1% of the principal amount of the Notes for each 1% decrease from the Initial Level to the Final Level of more than
17%.
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Any payments on the Notes are subject to our credit risk.
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The Notes do not pay interest.
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The Notes will not be listed on any securities exchange.
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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0.25%
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$
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Proceeds to Royal Bank of Canada
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99.75%
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$
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Buffered Digital Notes Linked to the S&P 500®
Index
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Issuer:
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Royal Bank of Canada (the “Bank”)
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference Asset:
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S&P 500® Index (SPX)
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Minimum Investment:
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$1,000 and minimum denominations of $1,000 in excess thereof
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Strike Date:
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September 21, 2023
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Trade Date (Pricing
Date):
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September 22, 2023
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Issue Date:
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September 27, 2023
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Valuation Date:
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September 21, 2026
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Maturity Date:
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September 24, 2026, subject to extension for market and other disruptions, as described in the product prospectus supplement dated September 14, 2021.
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Payment at Maturity (if
held to maturity):
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If the Final Level is greater than or equal to the Buffer Level (that is, the Percentage Change is greater than or equal to ‑17%),
then the investor will receive an amount per $1,000 principal amount per Note equal to:
The Digital Payment.
The payment on the Notes will not exceed the Digital Payment.
If the Final Level is less than the Buffer Level (that is, the Percentage Change is less than ‑17%), then the investor will receive
a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage)]
In this case, you could lose a substantial portion of the principal amount.
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Percentage Change:
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The Percentage Change, expressed as a percentage, is calculated using the following formula:
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Initial Level:
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The closing level of the Reference Asset on the Strike Date, as set forth on the cover page of this document.
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Final Level:
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The closing level of the Reference Asset on the Valuation Date.
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Digital Coupon:
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27% of the principal amount.
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Digital Payment:
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For each $1,000 in principal amount $1,000 plus the Digital Coupon ($1,270.00 per $1,000 in principal amount of the Notes).
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Buffer Percentage:
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17%
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Buffer Level:
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83% of the Initial Level, as set forth on the cover page of this document.
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Principal at Risk:
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The Notes are NOT principal protected. You may lose a
substantial portion of your principal amount at maturity if the Final Level is less than the Buffer Level.
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Calculation Agent:
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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 a pre-paid cash-settled derivative contract
for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different
from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax Consequences,” and the discussion (including the opinion of Ashurst LLP, our special U.S. tax counsel) in the
product
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Buffered Digital Notes Linked to the S&P 500®
Index
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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 of your Notes.
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Listing:
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The Notes will not be listed on any securities exchange.
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Clearance and
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 above the item captioned “Secondary Market” in this section and the 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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Buffered Digital Notes Linked to the S&P 500®
Index
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Buffered Digital Notes Linked to the S&P 500®
Index
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change is positive, and exceeds the percentage represented by the Digital Payment.
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Percentage Change:
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30%
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Payment at Maturity:
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$1,000 + ($1,000 x 27.00%) = $1,270.00
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On a $1,000 investment, a 30% Percentage Change results in a Payment at Maturity of $1,270.00, a 27.00% return on the Notes. In this case, the return on the Notes is less
than the Percentage Change of the Reference Asset.
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Example 2 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the Buffer Percentage).
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Percentage Change:
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-8%
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Payment at Maturity:
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$1,000 + ($1,000 x 27.00%) = $1,270.00
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On a $1,000 investment, a -8% Percentage Change results in a Payment at Maturity of $1,270.00, a 27.00% return on the Notes. In this case, the return on the Notes is
positive, even though the Percentage Change is negative.
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Example 3 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Buffer Percentage).
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Percentage Change:
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-60%
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Payment at Maturity:
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$1,000 + [$1,000 x (-60% + 17%)] = $1,000 - $430 = $570
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On a $1,000 investment, a -60% Percentage Change results in a Payment at Maturity of $570, a -43% return on the Notes.
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Buffered Digital Notes Linked to the S&P 500®
Index
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Hypothetical Final Level
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Payment at Maturity as Percentage
of Principal Amount
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Payment at Maturity
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150.00
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127.00%
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$1,270.00
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140.00
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127.00%
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$1,270.00
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130.00
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127.00%
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$1,270.00
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127.00
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127.00%
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$1,270.00
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120.00
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127.00%
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$1,270.00
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110.00
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127.00%
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$1,270.00
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105.00
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127.00%
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$1,270.00
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100.00
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127.00%
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$1,270.00
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90.00
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127.00%
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$1,270.00
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83.00
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127.00%
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$1,270.00
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80.00
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97.00%
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$970.00
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70.00
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87.00%
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$870.00
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60.00
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77.00%
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$770.00
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50.00
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67.00%
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$670.00
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40.00
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57.00%
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$570.00
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30.00
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47.00%
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$470.00
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20.00
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37.00%
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$370.00
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10.00
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27.00%
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$270.00
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0.00
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17.00%
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$170.00
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Buffered Digital Notes Linked to the S&P 500®
Index
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You May Not Receive the Full Principal Amount at Maturity — Investors in the Notes could lose a substantial portion of
their principal amount if there is a decline in the level of the Reference Asset. If the Final Level is less than the Buffer Level, you will lose 1% of the principal amount of your Notes for each 1% that the Final Level is less than the
Buffer Level.
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The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity — There will be no periodic interest payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which
could be negative, may be less than the return you could earn on other investments. 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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Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the appreciation
of the Reference Asset than an investment in a security linked to the Reference Asset providing full participation in the appreciation, because the payment at maturity will not exceed the sum of the principal amount and the Digital
Coupon. Accordingly, your return on the Notes may be less than your return would be if you made an investment in a security directly linked to the positive performance of the Reference Asset.
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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 the amount due on the maturity date is dependent upon our ability to repay our obligations at that time. This will be the case even
if the level of the Reference Asset increases after the Strike Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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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 of the Notes that will be set forth on the cover page of
the final pricing supplement for the Notes does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to sell the
Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the level of the Reference Asset, the borrowing rate we pay to issue
securities of this kind, and the inclusion in the price to the public of the underwriting discount and the estimated costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over
the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and
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Buffered Digital Notes Linked to the S&P 500®
Index
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of
the Notes Are Set — The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative
embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected
term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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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 Reference Asset that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates
will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the level
of the Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Reference Asset, including
making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’
obligations and your interests as a holder of the Notes. Moreover, we and our affiliates may have published, and in the future expect to publish, research reports with respect to the Reference Asset. This research is modified from time to
time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the level of the Reference
Asset, and, therefore, the market value of the Notes.
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You Will Not Have Any Rights to the Securities Included in the Reference Asset — As a holder of the Notes, you will not
have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any dividends paid on the securities
included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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The Payments on the Notes Are 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—Market Disruption Events” in the product prospectus supplement.
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Buffered Digital Notes Linked to the S&P 500®
Index
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Buffered Digital Notes Linked to the S&P 500®
Index
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Buffered Digital Notes Linked to the S&P 500®
Index
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Buffered Digital Notes Linked to the S&P 500®
Index
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Buffered Digital Notes Linked to the S&P 500®
Index
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Buffered Digital Notes Linked to the S&P 500®
Index
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Buffered Digital Notes Linked to the S&P 500®
Index
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P-15
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RBC Capital Markets, LLC
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