Citigroup prices ELKS linked to Countrywide, Apple

By Sheri Kasprzak

New York, July 26 - Citigroup Funding Inc. led structured products news, pricing two Equity LinKed Securities.

The company priced $20.98 million in ELKs linked to Countrywide Financial Corp. and $67.335 million in ELKs linked to Apple Inc.

The 13.5% Countrywide-based notes have a six-month term and pay a number of shares equal to the equity ratio or the cash value of those shares if the trading price of the underlying stock declines by 20% or more during the life of the notes. If the notes do not fall by 20% or more, the payout at maturity will be par in cash. The equity ratio equals 0.32787 shares per $10.00 in ELKS divided by the initial share price.

The 13% notes linked to Apple also have a six-month term and pay a number of shares equal to the equity ratio - or 0.07412 shares per $10.00 in ELKS divided by the initial share price, assuming the share price declines by 20% or more during the term of the notes. Otherwise, the notes pay par at maturity.

A volatile stock

"Countrywide is a name you're probably going to see more often," said one market insider on Thursday when asked about the frequency of Countrywide as a reference stock in reverse convertible-type offerings.

"It's interesting to watch because it has been increasingly volatile over the past month or so."

On Thursday, Countrywide's stock fell by 82 cents, or 2.73%, to close at $29.25 (NYSE: CFC).

So far this July, the stock has traded between $29.25 and $37.34 with the lowest on July 26 and the highest on July 6.

In June, the stock traded between $36.30 on June 28 and $39.22 on June 5.

Recent offerings

Earlier this month, Lehman Brothers Holdings Inc. priced a $500,000 offering of 24.8% annualized reverse exchangeable notes linked to Countrywide.

Those notes have a three-month term and pay par at maturity unless the stock falls below the 80% knock-in level during the life of the notes and finishes below the initial share price of $34.94. The notes then pay $1,000 divided by the initial share price.

On July 10, JPMorgan Chase & Co. announced plans to price reverse convertibles with an annualized coupon of 14% linked to Countrywide.

Those notes have a six-month term and pay par at maturity unless Countrywide's stock falls by more than 20% during the life of the notes and ends below the initial share price. The notes then pay a number of shares equal to $1,000 divided by the initial share price or, at the investment bank's option, the cash equivalent.

Apple's stock performance

As to the stock performance of Apple Inc., the company's stock gained $8.74, or 6.37%, on Thursday to close at $146.00 (Nasdaq: AAPL).

So far this month, the stock has ranged between $121.26 on July 2 and $143.75 on July 20.

In June, the stock traded between $118.40 on June 1 and $125.09 on June 18.

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