Credit Suisse links to emerging infrastructure index; product provides convenient access, distributor says

By Kenneth Lim

Boston, Aug. 26 - Credit Suisse, Nassau Branch's leveraged notes linked to emerging infrastructure stocks offers a simple way to gain exposure to the underlying theme, a distributor said.

Credit Suisse plans to price zero-coupon Buffered Accelerated Return Equity Securities (Bares) due Sept. 26, 2013 linked to the CS/RT Emerging Infrastructure index.

The underlying index tracks the stocks of the 50 emerging infrastructure companies with the highest scores based on Credit Suisse's HOLT methodology. Companies that are active in agriculture, power and utilities or infrastructure and have at least 15% of their revenues from global emerging markets are considered emerging infrastructure companies.

At maturity, the product will pay par plus 100% to 105% of the index's positive gain for each $1,000 note if the index ends higher than its initial level. If the final index level is flat or declines by no more than 20%, the notes will return par. Investors will lose 1% for every 1% that the index declines beyond 20%.

The exact participation rate will be set at pricing.

Product offers access

The product allows investors to easily focus their investment dollars on emerging infrastructure stocks that have been pre-selected, the distributor said.

"It's a very convenient option for investors who want to gain exposure to the sector," the distributor said. "Rather than go through all the stocks out there and deciding which ones to invest in, this index does the selection for you using the HOLT system, which looks at cash flow return on investment. It does some of the hard work for you."

The downside protection and the potentially leveraged payout should also attract investors, the distributor said.

"If you think the sector is going to do well, by investing in this product you get potentially 100% to 105% of any gain and 20% principal protection," the distributor said. "There's no cap, so you get potentially all of any gain in the index and more, and less of any decline."

Simple structure may see wide appeal

The distributor said the product targets a wide range of investors.

"It's a very simple structure to understand," the distributor said. "There's not a lot of bells and whistles, so it's a very straightforward kind of structure. I think retail investors, high net worth investors, institutional investors, anyone could be interested in this."

The distributor said investors should be aware of the risks of the product, which include potentially losing some principal if the underlying index falls beyond the buffer amount and underperforming risk-free investments if investors receive only par at maturity.

"Obviously the first criteria is you must think the sector is at least going to go up," the distributor said. "But if you compare it to a direct investment in the underlying, you see where the value of the product lies. You're getting all of the upside and only some of the downside."

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