RBC's New European Index Notes Offer Attractive Yields Amid Market Uncertainty

Rhea-AI Filing Summary

Royal Bank of Canada has filed a prospectus for Autocallable Strategic Accelerated Redemption Securities (STARS) linked to the EURO STOXX 50 Index. Key features include:

• Principal amount of $10.00 per unit with approximately 3-year term
• Automatic call feature if the index reaches or exceeds starting value on observation dates
• Call amounts range from $10.95-$11.05 (first year), $11.90-$12.10 (second year), to $12.85-$13.15 (third year)
• If not called, investors face 1-to-1 downside exposure with 100% principal at risk

Key risks include: no guaranteed principal return, credit risk exposure to RBC, limited investment returns, no direct investment in underlying index, and potential conflicts of interest with calculation agent BofAS. The securities will not be exchange-listed, and no trading market is expected to develop.

Positive

• Potential for attractive returns with call amounts offering up to 31.5% return over 3 years if called on final observation date
• Early call feature provides opportunity for earlier returns of 9.5-11.05% in year 1 or 19-21% in year 2

Negative

• 100% principal at risk with full downside exposure to EURO STOXX 50 Index declines
• Investment return is capped at predetermined call amounts, limiting upside potential even if index performs better
• No secondary market trading expected, limiting liquidity for investors
• Notes are subject to RBC's credit risk, with no FDIC insurance protection

Registration Statement No. 333-275898
Filed Pursuant to Rule 433

AUTOCALLABLE STRATEGIC ACCELERATED REDEMPTION SECURITIES^® (STARS^®)  

 

Autocallable Strategic Accelerated Redemption Securities® Linked to the EURO STOXX 50® Index
Issuer	Royal Bank of Canada (“RBC”). References on this page to “we,” “us” or “our” mean RBC.
Principal Amount	$10.00 per unit
Term	Approximately 3 years, if not called on the first or second Observation Dates
Market Measure	The EURO STOXX 50® Index (Bloomberg symbol: “SX5E”)
Automatic Call	Automatic call if the Observation Level of the Market Measure on any of the Observation Dates is equal to or greater than the Starting Value
Observation Level	The closing level of the Market Measure on the applicable Observation Date
Observation Dates	Approximately one, two and three years after the pricing date
Call Amounts	In the event of an automatic call, the amount payable per unit will be:  ·   [$10.95 to $11.05] if called on the first Observation Date  ·   [$11.90 to $12.10] if called on the second Observation Date  ·   [$12.85 to $13.15] if called on the final Observation Date, each to be determined on the pricing date 
Threshold Value	100% of the Starting Value
Payout Profile at Maturity	If not called, 1-to-1 downside exposure to decreases in the Market Measure, with 100% of your principal at risk
Preliminary Offering Documents	https://www.sec.gov/Archives/edgar/data/1000275/000095010325007834/dp230530_424b2-mlabg.htm
Exchange Listing	No

You should read the relevant Preliminary Offering Documents before you invest. Click on the Preliminary Offering Documents hyperlink above or call your Financial Advisor for a hard copy.

Risk Factors

Please see the Preliminary Offering Documents for a description of certain risks related to this investment, including, but not limited to, the following:

·       If the notes are not automatically called, your investment will 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.

·       Your investment return is limited to the return represented by the applicable Call Premium and may be less than a comparable investment directly in the securities included in the Market Measure.

·       The initial estimated value of the notes is only an estimate, determined as of a particular point in time by reference to our and our affiliates’ pricing models.

·       The public offering price you pay for the notes will exceed the initial estimated value.

·       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.

·       A trading market is not expected to develop for the notes.

·       Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in the securities included in the Market Measure), 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.

·       There may be potential conflicts of interest involving the calculation agent, which is BofAS.

·       The Market Measure sponsor may adjust the Market Measure 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 included in the Market Measure, 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 the securities included in the Market Measure, we, MLPF&S, BofAS and our respective affiliates do not control the issuers of those securities, and have not verified any disclosure made by any other company.

·       Your return on the notes and the value of the notes may be affected by exchange rate movements and factors affecting the international securities markets, specifically changes within the Eurozone.

·       The U.S. federal income tax consequences of an investment in the notes are uncertain.

Final terms will be set on the pricing date within the given range for the specified Market-Linked Investment. Please see the Preliminary Offering Documents for complete product disclosure, including related risks and tax disclosure.

 

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

 

FAQ

What are RY's STARS securities linked to the EURO STOXX 50 Index offering in terms of principal and term?

RY's Autocallable Strategic Accelerated Redemption Securities (STARS) are being offered with a principal amount of $10.00 per unit and a term of approximately 3 years, unless automatically called earlier on the first or second Observation Dates.

What are the potential call amounts for RY's STARS securities?

The STARS securities offer three potential call amounts: [$10.95 to $11.05] if called on the first Observation Date, [$11.90 to $12.10] if called on the second Observation Date, and [$12.85 to $13.15] if called on the final Observation Date, with exact amounts to be determined on the pricing date.

What is the automatic call feature of RY's STARS securities?

The STARS securities will be automatically called if the Observation Level (closing level) of the EURO STOXX 50 Index on any of the Observation Dates is equal to or greater than the Starting Value. Observation Dates occur approximately one, two, and three years after the pricing date.

What are the key risks of investing in RY's STARS securities?

Key risks include: 1) Potential loss of principal if not automatically called, 2) Returns may be less than conventional fixed/floating rate debt securities, 3) Subject to RY's credit risk, 4) Limited investment return to the Call Premium, 5) No expected trading market development, and 6) Exposure to Eurozone market and exchange rate risks.

How is the principal protected in RY's STARS securities?

The STARS securities offer no principal protection. If the securities are not automatically called, investors face 1-to-1 downside exposure to decreases in the EURO STOXX 50 Index, with 100% of the principal at risk.