The Toronto-Dominion Bank (TD) has offered Callable Contingent Interest Barrier Notes linked to the least performing of the Nasdaq-100 Index® (NDX), the Russell 2000® Index (RTY) and the S&P 500® Index (SPX). The Notes will pay a Contingent Interest Payment at a rate of approximately 8.75% per annum only if the Closing Value of each Reference Asset is greater than or equal to its Contingent Interest Barrier Value (75% of Initial Value) on the Contingent Interest Observation Date. If not, no payment will be made.
Key Features:
- Term: Approximately 57 months, subject to an Issuer Call.
- Principal Amount: $1,000 per Note.
- Contingent Interest Rate: Approximately 8.75% per annum.
- Contingent Interest Barrier Value: 75% of Initial Value.
- Barrier Value: 70% of Initial Value.
- Call Feature: TD may call the Notes in whole on any monthly Call Payment Date (commencing on the twelfth Contingent Interest Payment Date) upon at least three Business Days’ prior written notice.
- Payment at Maturity:
- If called by TD, payment equal to Principal Amount plus any Contingent Interest Payment otherwise due.
- If not called, payment depends on the Final Value of each Reference Asset relative to its Barrier Value (70% of Initial Value):
- If all Final Values are greater than or equal to Barrier Values: $1,000 (Principal Amount).
- If any Final Value is less than its Barrier Value: $1,000 + ($1,000 × Least Performing Percentage Change).
Risks:
- Loss of Investment: Investors may lose up to their entire investment if the Final Value of any Reference Asset is less than its Barrier Value.
- No Contingent Interest Payment: No payment will be made if the Closing Value of any Reference Asset is less than its Contingent Interest Barrier Value on a Contingent Interest Observation Date.
- Limited Positive Return: The potential positive return is limited to the Contingent Interest Payments paid, regardless of any appreciation of the Reference Assets.
- Issuer Call Risk: TD may call the Notes prior to maturity, leading to reinvestment risk.
- Market Risk: Investors are exposed to the market risk of each Reference Asset on each Contingent Interest Observation Date.
- Liquidity Risk: There may be little or no secondary market for the Notes, and any secondary market prices will likely be less than the public offering price.
- Credit Risk: Investors are subject to TD’s credit risk.
- Taxation Risk: The U.S. tax treatment of the Notes is uncertain, and Canadian tax treatment may also have implications for non-resident holders.
Hypothetical Returns:
- Example 1 (TD Calls Notes): Total return of 8.0212% if TD calls the Notes on the first potential Call Payment Date and the Closing Value of at least one Reference Asset is less than its Contingent Interest Barrier Value.
- Example 2 (No Payment, Final Values Meet Barrier Values): Total return of 0.7292% if no Contingent Interest Payments are made and the Final Value of each Reference Asset is greater than or equal to its Barrier Value.
- Example 3 (No Payment, Final Value Below Barrier Value): Total return of 0.00% if no Contingent Interest Payments are made and the Final Value of at least one Reference Asset is less than its Contingent Interest Barrier Value.
- Example 4 (Loss): 60.00% loss if no Contingent Interest Payments are made and the Final Value of at least one Reference Asset is less than its Contingent Interest Barrier Value and Barrier Value.
Conclusion:
The Notes offer a potentially high return but come with significant risks, including the possibility of losing the entire investment. Investors should carefully consider the risks and consult with their advisors before investing.
