ABN Amro, Rabo to price slate of reverse convertibles with big coupons

By Sheri Kasprzak

New York, April 3 - Rabo Bank Financial Services BV and ABN Amro Bank NV both announced several reverse convertible offerings Tuesday with rather large coupons.

Over the past week, some market insiders have suggested that coupons on reverse convertibles may be heading southward but these offerings got market sources talking.

"I don't think the big-coupon deals ever left," said one equity structurer when asked if the market is seeing a resurgence in coupon levels.

"You get one or two bad stock days but that doesn't mean the [structured products] market isn't ripe for big coupons. A lot depends on a particular [reference] stock and there are so many other factors to consider. You can't really judge by just a few sessions. You look at these things over a period of time so that one day is just a very small part of it."

Another market source agreed.

"I've seen no evidence [that coupons are getting smaller]," she said, noting that a lot of the bigger coupons she has seen lately have been on shorter-term notes.

The notes announced Tuesday all have terms of six months or less.

ABN Amro's offerings

Heading up those big-coupon offerings is a 25% knock-in reverse exchangeable note from ABN Amro linked to Theravance, Inc.

The six-month notes are set to price on April 13.

The note pays par at maturity unless the stock falls below the 80% knock-in level. If the stock does fall the below the knock-in level and ends below the initial share price, the note pays a number of shares equal to $1,000 divided by the initial share price.

ABN Amro also plans to price 18% knock-in reverse exchangeables linked to Level 3 Communications, Inc.

Those three-month notes pay also pay par at maturity unless the stock falls below the 80% knock-in level and ends below the initial share price.

If that happens, the notes pay a number of shares equal to $1,000 divided by the initial share price.

The Level 3-linked notes are also set to price on April 13.

Rabo's reverse convertibles

Moving to Rabo Bank's reverse convertible offerings, the investment bank plans to price 21% notes linked to the American Depositary Shares of Elan Corp. plc.

The notes are set to price April 13 and have a three-month term.

Unless the notes fall below the 80% knock-in level, the notes pay par at maturity.

If the notes fall below the knock-in level and finish below the initial share price, the notes pay a number of shares equal to $1,000 divided by the initial share price.

JetBlue-linked notes

In other news at Rabo, a reverse convertible linked to JetBlue Airways Corp. is expected to price later this month.

The notes are among several reverse convertibles linked recently to the troubled airline.

The 13% notes have a one-year term and are expected to price April 20.

The notes pay par at maturity unless the stock falls below the 70% knock-in level and ends below the initial share price.

The notes will then pay a number of shares equal to $1,000 divided by the initial share price.

Several JetBlue offerings

The Rabo notes are one of several recent transactions linked to the stock of JetBlue.

In late March, Barclays Bank plc priced $3 million in 16.25% reverse convertibles linked to the stock.

Also in late March, JPMorgan Chase & Co. priced $2.138 million in reverse convertibles linked to JetBlue and $5.195 million in notes linked to the stock.

The airline has suffered major losses following several delays from snowstorms in the Northeast this winter. The company reported back in February that it expects to post a larger than expected operating loss for the first quarter.

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