CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered |
Maximum Aggregate Offering Price |
Amount of Registration Fee(1) | ||
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM due May 26, 2023 |
$12,776,300 | $1,590.65 |
(1) | The filing fee is calculated in accordance with Rule 457(r) under the Securities Act of 1933, as amended. |
Filed Pursuant to Rule 424(b)(2) Registration Statement No. 333-206953 (To Prospectus dated September 15, 2015, Prospectus Supplement dated March 3, 2016 and Product Supplement EQUITY INDICES LIRN-1 dated April 24, 2018) |
The notes are being issued by SunTrust Banks, Inc. (SunTrust). 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, page PS-7 of product supplement EQUITY INDICES LIRN-1 and page S-2 of the accompanying Series A MTN prospectus supplement.
The initial estimated value of the notes as of the pricing date is $9.537 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-12 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 |
$ 10.00 | $ 12,776,300.00 | ||||||||||
Underwriting discount |
$ 0.25 | $ 319,407.50 | ||||||||||
Proceeds, before expenses, to SunTrust |
$ 9.75 | $ 12,456,892.50 |
The notes:
Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
Merrill Lynch & Co.
May 24, 2018
1,277,630 Units $10 principal amount per unit CUSIP No. 867914848
Pricing Date Settlement Date Maturity Date
May 24, 2018 June 1, 2018 May 26, 2023
SunTrust Banks, Inc. Leveraged Index Return Notes®
Linked to the Dow Jones Industrial AverageSM
◾Maturity of approximately five years ◾ 113.10% leveraged upside exposure to increases in the Index
◾1-to-1 downside exposure to decreases in the Index beyond a 20.00% decline, with up to 80.00% of your
principal at risk
◾All payments occur at maturity and are subject to the credit risk of SunTrust Banks, Inc., as issuer of the notes
◾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
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
Summary
The Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 (the notes) are our senior unsecured debt securities. The notes are not insured by the Federal Deposit Insurance Corporation or secured by collateral. The notes will rank equally with all of SunTrusts other unsecured and unsubordinated debt. Any payments due on the notes, including any repayment of principal, will be subject to the credit risk of SunTrust, as issuer. The notes provide you a leveraged return if the Ending Value of the Market Measure, which is the Dow Jones Industrial AverageSM, (the Index), is greater than its Starting Value. If the Ending Value is less than the Threshold Value, you will lose a portion, which could be significant, of 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 Participation Rate) are based on SunTrusts internal funding rate, which is the rate it would pay to borrow funds through the issuance of market-linked notes and the economic terms of certain related hedging arrangements. SunTrusts internal funding rate is typically lower than the rate it would pay when it issues conventional fixed or floating rate debt securities. This difference in funding 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. 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 initial estimated value was determined based on our pricing models, which take into consideration SunTrusts internal funding rate and the market prices for the hedging arrangements related to the notes. For more information about the initial estimated value and the structuring of the notes, see Structuring the Notes on page TS-12.
Leveraged Index Return Notes® | TS-2 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
The terms and risks of the notes are contained in this term sheet and in the following:
§ | Product supplement EQUITY INDICES LIRN-1 dated April 24, 2018: |
https://www.sec.gov/Archives/edgar/data/750556/000119312518128939/d496427d424b2.htm
§ | Series A MTN prospectus supplement dated March 3, 2016: |
https://www.sec.gov/Archives/edgar/data/750556/000119312516491727/d68584d424b2.htm
§ | Prospectus dated September 15, 2015: |
https://www.sec.gov/Archives/edgar/data/750556/000119312515320537/d11086ds3asr.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 EQUITY INDICES LIRN-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to we, us, our, or similar references are to SunTrust.
Investor Considerations
We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
Leveraged Index Return Notes® | TS-3 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
Hypothetical Payout Profile and Examples of Payments at Maturity
This graph reflects the returns on the notes, based on the Participation Rate of 113.10% and the Threshold Value of 80% of the Starting Value. The green 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. | ||
|
The following table and examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. They illustrate the calculation of the Redemption Amount and total rate of return based on a hypothetical Starting Value of 100, the Threshold Value of 80, the Participation Rate of 113.10% and a range of hypothetical Ending Values. The actual amount you receive and the resulting total rate of return will depend on the actual Starting Value, Threshold Value, Ending Value, and whether you hold the notes to maturity. The following examples do not take into account any tax consequences from investing in the notes.
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.
Ending Value |
Percentage Change from the Starting Value to the Ending Value |
Redemption Amount per Unit(1) |
Total Rate of Return on the Notes | |||
0.00 | -100.00% | $2.000 | -80.00% | |||
50.00 | -50.00% | $7.000 | -30.00% | |||
70.00 | -30.00% | $9.000 | -10.00% | |||
80.00(3) | -20.00% | $10.000 | 0.00% | |||
90.00 | -10.00% | $10.000 | 0.00% | |||
94.00 | -6.00% | $10.000 | 0.00% | |||
97.00 | -3.00% | $10.000 | 0.00% | |||
100.00(2) | 0.00% | $10.000 | 0.00% | |||
102.00 | 2.00% | $10.226 | 2.26% | |||
105.00 | 5.00% | $10.565 | 5.65% | |||
110.00 | 10.00% | $11.131 | 11.31% | |||
120.00 | 20.00% | $12.262 | 22.62% | |||
130.00 | 30.00% | $13.393 | 33.93% | |||
140.00 | 40.00% | $14.524 | 45.24% | |||
150.00 | 50.00% | $15.660 | 56.60% | |||
160.00 | 60.00% | $16.786 | 67.86% |
(1) | The Redemption Amount per unit is based on the Participation Rate. |
(2) | The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only. The actual Starting Value is 24,811.76, which was the closing level of the Market Measure on the pricing date. |
(3) | This is the hypothetical Threshold Value. |
Leveraged Index Return Notes® | TS-4 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
Redemption Amount Calculation Examples
Example 1
The Ending Value is 70.00, or 70.00% of the Starting Value:
Starting Value: | 100.00 | |
Threshold Value: | 80.00 | |
Ending Value: | 70.00 |
$10 | [ | $10 × | ( | 80 70 | ) | ] | = $9.00 Redemption Amount per unit | |||||||||
100 |
Example 2
The Ending Value is 90.00, or 90.00% of the Starting Value:
Starting Value: | 100.00 | |
Threshold Value: | 80.00 | |
Ending Value: | 90.00 |
Redemption Amount (per unit) = $10.00, the principal amount, since the Ending Value is less than the Starting Value but equal to or greater than the Threshold Value.
Example 3
The Ending Value is 150.00, or 150.00% of the Starting Value:
Starting Value: | 100.00 | |
Ending Value: | 150.00 |
$10 + |
[ | $10 × 113.10% × | ( | 150 100 | ) | ] | = $15.66 Redemption Amount per unit | |||||||||
100 |
Leveraged Index Return Notes® | TS-5 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
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 EQUITY INDICES LIRN-1 and page S-2 of the Series A MTN prospectus supplement. 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, 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. |
§ | Your investment return may be less than a comparable investment directly in the stocks included in the Index. |
§ | Our initial estimated value of the notes set forth on the cover page is lower than the public offering price of the notes and may differ from the market value of the notes in the secondary market, if any. The public offering price of the notes exceeds our initial estimated value of the notes because costs associated with selling and structuring the notes, as well as hedging the notes, are included in the public offering price of the notes. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial estimated value. This is due to, among other things, changes in the value of the Index, our internal funding rate, and the inclusion in the public offering price of the underwriting discount and the expected hedging related charge, all as further described in Structuring the Notes beginning on page TS-12. 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 the secondary market (if any exists) and will affect the value of the notes in complex and unpredictable ways. |
§ | Our initial estimated value does not represent future values of the notes and may differ from others estimates. The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates pricing models. These pricing models consider certain assumptions and variables, including our credit spreads, our internal funding rate for market linked notes, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. Our estimated value does not represent a minimum price at which we or any other party would be willing to buy the notes in any secondary market (if any exists) at any time. |
§ | Our initial estimated value of the notes is not determined by reference to credit spreads for our conventional fixed-rate debt. |
§ | A trading market is not expected to develop for the notes. None of us or MLPF&S is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market. |
§ | The trading and hedging activities of us, MLPF&S and our respective affiliates (including trades in shares of companies included in the Index) and any hedging and trading activities that we, MLPF&S or our respective affiliates engage in that are not for your account or on your behalf, 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 or our respective affiliates may from time to time own securities included in the Market Measure, we, MLPF&S and our respective affiliates do not control any company included in the Market Measure, and have not verified any disclosure made by any other company. |
§ | There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent. |
§ | The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See Summary Tax Consequences below and U.S. Federal Income Tax Considerations beginning on page PS-30 of product supplement EQUITY INDICES LIRN-1. |
Leveraged Index Return Notes® | TS-6 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
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, and is subject to change by, Dow Jones Indexes, the marketing name of CME Group Index Services LLC (CME Indexes, 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 Dow Jones Indexes discontinuing publication of the Index are discussed in the section entitled Description of the LIRNs Discontinuance of an Index on page PS- 19 of product supplement EQUITY INDICES LIRN-1. None of us, the calculation agent, or MLPF&S accepts any responsibility for the calculation, maintenance, or publication of the Index or any successor 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 stocks 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 components 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 tends 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. Nine main groups of companies constitute the Index, with the approximate sector weights of the Index as of May 22, 2018 indicated in parentheses: Industrials (23.7%); Information Technology (18.3%); Financials (16.2%); Consumer Discretionary (14.5%); Health Care (12.8%); Energy (5.8%); Consumer Staples (5.5%); Materials (1.9%); and Telecommunications Services (1.4%).
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.
Leveraged Index Return Notes® | TS-7 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
The following table presents the listing symbol, industry group, price per share, and component stock weight for each of the top 10 component stocks in the Index based on publicly available information on May 24, 2018.
Issuer of Component Stock |
Symbol |
Industry |
Component | |||
The Boeing Company |
BA | Aerospace | 9.96% | |||
UnitedHealth Group Incorporated |
UNH | Health Care Providers | 6.74% | |||
The Goldman Sachs Group, Inc. |
GS | Investment Services | 6.55% | |||
3M Company |
MMM | Diversified Industrials | 5.53% | |||
Apple Inc. |
AAPL | Computer Hardware | 5.22% | |||
The Home Depot, Inc. |
HD | Home Improvement Retailers | 5.19% | |||
McDonalds Corporation |
MCD | Restaurants & Bars | 4.51% | |||
Caterpillar Inc. |
CAT | Machinery | 4.38% | |||
International Business Machines Corporation |
IBM | Computer Services | 4.00% | |||
Visa, Inc. |
V | Financial Services | 3.66% |
Leveraged Index Return Notes® | TS-8 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
The following graph shows the daily historical performance of the INDU in the period from January 1, 2008 through May 24, 2018. 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 INDU was 24,811.76.
Historical Performance of the INDU
This historical data on the INDU is not necessarily indicative of the future performance of the INDU or what the value of the notes may be. Any historical upward or downward trend in the level of the INDU during any period set forth above is not an indication that the level of the INDU 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 INDU.
License Agreement
S&P® is a registered trademark of Standard & Poors Financial Services LLC (S&P) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). These trademarks have been licensed for use by S&P Dow Jones Indices LLC. Standard & Poors®, S&P 500® and S&P® are trademarks of S&P. These trademarks have been sublicensed for certain purposes by us. The INDU is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by MLPF&S.
The notes are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or 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 holders 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 INDU to track general market performance. S&P Dow Jones Indices only relationship to MLPF&S with respect to the INDU is the licensing of the INDU and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its third party licensors. The INDU is determined, composed and calculated by S&P Dow Jones Indices without regard to us, MLPF&S, or the notes. S&P Dow Jones Indices have no obligation to take our needs, BACs needs or the needs of MLPF&S or holders of the notes into consideration in determining, composing or calculating the INDU. 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 INDU will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors. Inclusion of a security or futures contract within an INDU is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or futures contract, 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 us, 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 INDU. It is possible that this trading activity will affect the value of 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 US, BAC, MLPF&S, HOLDERS 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 DOW JONES INDICES BE LIABLE
Leveraged Index Return Notes® | TS-9 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
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 MLPF&S, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
Leveraged Index Return Notes® | TS-10 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
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 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, 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 acting as a principal in effecting the transaction for your account.
MLPF&S may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these will include MLPF&Ss 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. At MLPF&Ss discretion, for a short, undetermined initial period after the issuance of the notes, 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. 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 Index 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.
The value of the notes shown on your account statement will be based on MLPF&Ss estimate of the value of the notes if MLPF&S or one of our affiliates were to make a market in the notes, which it is not obligated to do. 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. At certain times, this 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 SunTrust or for any purpose other than that described in the immediately preceding sentence.
Leveraged Index Return Notes® | TS-11 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
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, we typically borrow the funds under these types of notes at a rate that is more favorable to us than the rate that we might pay for a conventional fixed or floating rate debt security. This rate, which we refer to in this term sheet as our internal funding rate, is typically lower than the rate we would pay when it issues conventional fixed or floating rate debt securities. This generally relatively lower internal funding rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-linked notes, resulted in the initial estimated value of the notes on the pricing date being less than their public offering price.
At maturity, we are required to pay the Redemption Amount to holders of the notes, which will be calculated based on the performance of the Index and the $10 per unit principal amount. 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 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.
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 FactorsGeneral Risks Relating to LIRNs beginning on page PS-7 and Use of Proceeds and Hedging on page PS-15 of product supplement EQUITY INDICES LIRN-1.
Leveraged Index Return Notes® | TS-12 |
Leveraged Index Return Notes® Linked to the Dow Jones Industrial AverageSM, due May 26, 2023 |
Summary Tax Consequences
You should consider the U.S. federal income tax consequences of an investment in the notes, including the following:
◾ | There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes. |
◾ | You agree with us (in the absence of an administrative determination, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as prepaid financial contracts with respect to the Index. |
◾ | Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning on page PS-32 of the product supplement) generally will recognize capital gain or loss upon maturity or upon a sale or exchange of the notes prior to maturity. This capital gain or loss generally will be long-term capital gain or loss if you held the notes for more than one year. |
◾ | No assurance can be given that the IRS or any court will agree with this characterization and tax treatment. |
◾ | Under current Internal Revenue Service guidance, withholding on dividend equivalent payments (as discussed in the product supplement), if any, will not apply to notes that are issued as of the date of this term sheet unless such notes are delta-one instruments. |
You should consult your own tax advisor concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as any tax consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax laws. You should review carefully the discussion (including the opinion of our counsel, King & Spalding LLP) under the section entitled U.S. Federal Income Tax Considerations beginning on page PS-27 of product supplement EQUITY INDICES LIRN-1.
Validity of the Notes
In the opinion of King & Spalding LLP, as counsel to SunTrust, when the notes offered by this term sheet have been executed and issued by SunTrust and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will constitute valid and legally binding obligations of SunTrust, enforceable against SunTrust in accordance with their terms, subject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors generally, and the effects of general principles of equity. This opinion is given as of the date of this pricing supplement and is limited to the federal laws of the Unites States of America and the laws of the states of New York and Georgia. In addition, this opinion is subject to customary assumptions about the trustees authorization, execution, delivery and, with respect to the notes, authentication, of the indenture and the notes and the validity, binding nature and enforceability of the indenture and notes with respect to the trustee, all as stated in the letter of such counsel dated September 15, 2015, which has been filed as an exhibit to SunTrusts Registration Statement relating to the notes filed with the SEC on such date.
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 relating to this offering 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.
Leveraged Index Return Notes® | TS-13 |