Wachovia to price principal-protected notes linked to BRIC basket; Citigroup prices $150 million in ELKS

By Sheri Kasprzak

New York, March 7 - Another BRIC basket led structured products news on Wednesday, this offering announced by Wachovia Corp.

The zero-coupon principal-protected notes, linked to equal weights of the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi, are one of several BRIC offerings - one of the few emerging markets baskets that currently appeal to investors, according to multiple market sources.

One source on Wednesday said that because a lot of emerging markets currencies lost their value following last week's massive stock market dive, the BRIC basket has gained in appeal because it has not been devalued.

"BRIC remains strong and investors in EM are looking for that one spot of strength," said the market source. "I suspect EM [currencies] will rebound later this year."

Wachovia's offering

The one-year Wachovia notes will track the performance of each currency against the U.S. dollar. Payout at maturity will be par of $10.00 plus any percentage increase in the basket. Investors can expect to receive at least par.

On Tuesday, Deutsche Bank AG, London Branch announced that it intends to price two appreciation notes linked to a BRIC basket.

Both BRIC notes are 18-month notes and are both principal-protected. Both are expected to price March 22.

A market source contacted Tuesday agreed that BRIC offerings are more likely to be prevalent in structured products since other emerging markets currencies have fallen off.

Citigroup's ELKS

Elsewhere in structured products news Wednesday, Citigroup Funding Inc. announced the pricing of $150 million in Equity LinKed Securities linked to the stock of D.R. Horton, Inc.

The one-year ELKS pay a cash value of one share of D.R. Horton stock at maturity, with a cap of $29.98 per $24.9857 in principal, equal to a maximum return of 20%.

D.R. Horton's stock closed down a penny on Wednesday at $24.55 and lost another 26 cents in after-hours trading (NYSE: DHI).

Merrill prices commodity notes

Another large offering came Wednesday from Merrill Lynch & Co. The investment bank priced $56 million in 0% Accelerated Return Notes linked to the Merrill Lynch Commodity Index eXtra - Excess Return.

Payout on the 14-month notes at maturity will be par of $10.00 plus triple any percentage increase in the index level, up to 24%. Investors are exposed to any declines.

Barclays' commodity notes

In another offering, also linked to commodities, Barclays Bank plc said it will price 100% principal-protected "Breakfast Bond" notes linked to the performance of a basket of sub-indexes of the Goldman Sachs Commodity Index.

The five-year notes are linked to a basket that includes live cattle, lean hogs, coffee, corn, soybeans, sugar and wheat.

If the investors hold their notes until maturity, they will receive a cash payment of par multiplied by the product of the participation rate of 100% and the basket performance, assuming the basket performance is greater than zero. If the performance is below zero, investors will receive par.

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