Goldman sells $52 million international demand notes for Eksportfinans; Morgan Stanley to sell bearish KBW notes

By LLuvia Mares

New York, Oct. 31 - Investors betting against the dollar may want to take a closer look at a structure from Eksportfinans ASA, advised one market specialist.

The issuer priced $52 million of 0% enhanced outperformance notes due Aug. 10, 2009 linked to a basket of 46 "high international demand" stocks and a basket of 49 "low international demand" stocks via underwriter Goldman, Sachs & Co.

"It's a decent deal, but it seems to me that you are really just betting on whether the dollar is going to stay weak or not," said a market specialist.

"A weak dollar is going to make exports do better, and these companies that have a strong international demand are going to profit from the weaker dollar. If you think the dollar is going to be weak I guess you would want to buy this deal."

The stocks in each basket are drawn from the S&P 500 index. The companies' level of international demand is determined based on the percentage of revenues earned outside the United States.

If the performance of the high-demand basket is greater than or equal to the performance of the low-demand basket, the payout at maturity will be par plus double the outperformance amount, subject to a maximum return of 30.5%.

Otherwise, the payout will be par minus the amount by which the high-demand basket underperforms the low-demand basket.

Morgan Stanley plans bearish mortgage notes

In a play related to the troubles in the housing sector, Morgan Stanley plans to price 0% bear market auto-callable securities due June 1, 2009 linked to the KBW Mortgage Finance index.

"This is a pretty cool idea, everyone kind of hates mortgage finance right now," said a market observer.

"It seems like it will probably do okay. I haven't seen a lot of these bear market auto-callables do well in the third party space, I think it will probably just takes a little bit more explaining than some of the third-party groups care to do.

"But a wire house like Morgan Stanley can manage that sales process in house so they will probably do okay."

The KBW Mortgage Finance index is a float-adjusted modified capitalization-weighted index of 24 companies designed to represent the performance of the U.S. mortgage finance industry.

If the closing value is less than the initial value on five determination dates, the securities will automatically be redeemed at par plus 105% to 106%, or $1,050 to $1,060 on Feb. 27, 2008 - the first determination date, $1,100 to $1,120 on May 27, 2008 - the second determination date, $1,150 to $1,180 on Aug. 27, 2008 - the third determination date, $1,200 to $1,240 on Nov. 27 2008 - the fourth determination date, and $1,250 to $1,300 on Feb. 27, 2009 - the fifth determination date. The exact levels will be fixed at pricing.

If the securities are not called, the payout at maturity will be $1,300 to $1,360 if the index shows a negative return. If the trigger level, 120% of the initial index value, is hit during the life of the notes, investors will participate in any loss. Otherwise the payout is par.

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