Standardized terminology catching on; Deutsche Bank prices $50 million in S&P 500-linked notes

By Sheri Kasprzak

New York, March 29 - A standardized naming system for structured products has been thrown about quite a bit lately but now more investment banks are starting to adopt the system, which was proposed to the Structured Products Association by JPMorgan Chase & Co. late last year.

The standardized deal names come on the heels of the SPA's conference in New York and a major theme of that conference was the need to standardize the marketplace to make deals more comprehensible to potential buyers.

"I think it's an indication that we're moving in the right direction," said a market source at a bank that is currently working towards coming on line with the standardized naming system set forth by JPMorgan Chase.

"We're not there yet but it shouldn't be long. Obviously Lehman came on first. I think we're not too far off. It's definitely a smart move and it will make the market a bit easier to understand, a bit more streamlined and maybe a bit more mainstream than it is."

"It's something we're all going to eventually catch on with," said another market source. "If we have any chance of catching up with the European market, we'll really have no choice.

"It's a confusing business and the proprietary names just aren't working. The investors don't know what they're buying."

Open architecture, another key theme of the conference, is also beginning to catch on, as indicated by a Lehman Brothers Holdings Inc. offering from Wednesday and a few recent offerings from Deutsche Bank AG, London Branch.

Deutsche, UBS team up

In terms of open architecture, Deutsche Bank recently priced several deals using UBS Financial Services Inc. as the lead agent with Deutsche as co-agent.

The largest of those deals was a $50 million offering of zero-coupon principal-protected absolute return barrier notes linked to the S&P 500 index.

The 18-month notes pay par of $10.00 plus the absolute value of the return on the index, whether positive or negative at maturity if the index remains within the index range during the life of the notes. If the index does not remain in the index range, payout will be par.

The upper and lower boundaries of the index range are 21% above and below the initial index level.

In another sizable deal, UBS was the agent on a $15 million offering from Deutsche Bank of 0% performance securities, also linked to the S&P 500 index.

The payout on those notes will be par of $10.00 plus 109% of any gain on the index.

If the index does not decline below the 718.75 trigger level, half of the initial level, payout will be par. If the index does fall below the trigger at any time during the life of the notes, the investors will share in any losses.

Lehman sets standard

On Wednesday, Lehman Brothers announced the pricing terms of two offerings with rather standardized names - a $32 million issue of zero-coupon principal-protected notes linked to an index basket and a $23.5 million issue of 0% performance securities with partial protection also linked to an index basket.

In the $32 million offering, the four-year notes are linked to a 33.34% weight of the S&P 500 index, a 33.33% weight of the Dow Jones Euro Stoxx 50 index and a 33.33% weight of the Nikkei 225 index.

The payout on the notes will be par plus 109.4% of any percentage increase in the basket level. Investors will receive at least par at maturity.

The $23.5 million notes pay par plus 119.6% of any percentage increase in the basket level. Payout will be par if the level remains flat or declines by no more than 20%. Investors will lose 1% for every 1% decline beyond 20%.

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