By Angela McDaniels
Tacoma, Wash., Jan. 29 - Credit Suisse AG, Nassau Branch sold $25 million of Credit Suisse gold shares covered call exchange-traded notes due Feb. 2, 2033 linked to the Credit Suisse Nasdaq Gold Flows 103 index, according to a 424B2 filing with the Securities and Exchange Commission.
The index seeks to implement a rolling covered call investment strategy by maintaining a notional long position in shares of the SPDR Gold Trust while notionally selling monthly out-of-the-money call options on that position. The notes are designed to pay a variable monthly coupon.
"Gold is often criticized as a portfolio investment because of its lack of any yield," Greg King, head of exchange-traded products in Credit Suisse's investment bank, said in a company news release. "Covered call strategies, however, are designed to enhance yield in exchange for sacrificing part of the upside of an investment position. [This ETN] seeks to provide investors and their advisers an interesting new way to introduce monthly cash flows into their portfolios."
Note terms
The notes priced at par of $20. Additional notes may be offered and sold from time to time at variable prices. The issuer plans to sell up to $100 million of the notes.
The maturity date may be extended at Credit Suisse's option for up to two additional five-year periods.
The ETNs will pay a variable monthly coupon based on the notional option premiums received from the sale of the covered call options on the SPDR Gold Trust shares each month. The prospectus said that because the amount of any monthly coupon payment is uncertain and could be zero, investors should not expect to receive regular periodic interest payments.
The payout at maturity will equal the average of the closing indicative values for the five trading days ending Jan. 28, 2033.
The closing indicative value was $20 on the inception date. On subsequent days, it equals the current principal amount plus any accrued coupon. The closing indicative value will never be less than zero. If the closing indicative value is equal to zero on any trading day, the closing indicative value on that day and all future days will be zero.
The current principal amount was $20 on the inception date. On subsequent days, it equals the current principal amount on the preceding day times the daily index factor minus the daily investor fee. The investor fee is 0.65% per year.
The daily index factor is the closing level of the index on that day divided by the closing level of the index on the preceding day.
The notes are callable in whole or in part at any time and are putable subject to a minimum of 50,000 ETNs and an early redemption charge of 0.125%.The notes will be automatically called if the intraday indicative value of the ETNs falls below 5% of the prior day's closing indicative value.
The notes are listed on Nasdaq under the ticker symbol "GLDI."
Credit Suisse Securities (USA) LLC is the agent.
More index information
The index strategy consists of a hypothetical portfolio that takes a long position in SPDR Gold Trust shares and sells a succession of short call options - about one month - on the shares with a strike price of about 103. The sale of the options is "covered" by the long position in the SPDR Gold Trust shares. The long position in the shares and the short call options are held in equal notional amounts.
This strategy is intended to provide exposure to gold through the notional positions in the SPDR Gold Trust shares and the options that seeks to (i) generate periodic cash flows that a direct long-only ownership position in the shares would not, (ii) provide a limited offset to losses from downside market performance in the shares via the cash flows from option premiums and (iii) provide limited potential upside participation in the performance of the shares.
The level of the Nasdaq Gold Flows index on any day reflects the value of the notional long position in the SPDR Gold Trust shares and the notional option premium, reduced based on the value of the options then outstanding.
| Issuer: | Credit Suisse AG, Nassau Branch
|
| Issue: | Credit Suisse gold shares covered call exchange-traded notes
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| Underlying index: | Credit Suisse Nasdaq Gold Flows 103 index
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| Amount: | $25 million
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| Maturity: | Feb. 2, 2033; may be extended at issuer's option for up to two additional five-year periods
|
| Coupon: | Variable monthly coupon based on premiums received from sale of monthly call options on SPDR Gold Trust shares; could be zero
|
| Price: | $20
|
| Payout at maturity: | Average of closing indicative values for five trading days ending Jan. 28, 2033
|
| Closing indicative value: | Current principal amount plus any accrued coupon
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| Current principal amount: Current principal amount on preceding day times daily index factor - closing index level on that day divided by closing level on preceding day - minus investor fee of 0.65% per year
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| Put option: | Subject to minimum of 50,000 ETNs and 0.125% early redemption charge
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| Call option: | At any time; in addition, notes will be automatically called if their intraday indicative value falls below 5% of prior day's closing indicative value
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| Pricing date: | Jan. 28
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| Settlement date: | Feb. 1
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| Agent: | Credit Suisse Securities (USA) LLC
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| Listing: | Nasdaq: GLDI
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| Cusip: | 22542D480
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