Svensk prices $55.345 million in principal-protected notes linked to two currencies

By Sheri Kasprzak

New York, Aug. 7 - AB Svensk Eksportkredit negotiated a $55.345 million offering of principal-protected notes linked to equal weights of the Brazilian real and the Chinese renminbi, both against the U.S. dollar.

A market insider said Tuesday that he felt it was interesting that the two currencies were priced separate from a BRIC basket.

"There has been a drop in the number of BRIC deals," he said. "I feel this is probably because investors are interested in these particular currencies but not in a BRIC structure."

Tim Mortimer, a London-based analyst with Future Value Consultants, said in a recent interview that he feels the movement in the U.S. dollar is probably more important with regard to BRIC-related offerings than the movements of those individual currencies.

Mortimer said he also had not seen many BRIC-related offerings recently, noting that there was a rush of offerings earlier in the year.

On Aug. 6, the real/U.S. dollar exchange rate was $0.524. The month before, the exchange rate was about $0.52.

The renminbi/U.S. dollar rate was $0.1315 on Aug. 6 and was about $0.130 on July 6.

The one-year notes pay par times 111.5% if the basket performance is equal to or greater than 1.03. If the basket performance is less than 1.03, the investors will receive par at maturity.

Investors will receive at least par at maturity.

Goldman Sachs & Co. was underwriter.

Morgan Stanley's commodity-linked notes

In other structured products news Tuesday, Morgan Stanley priced a $25 million offering of capital-protected notes linked to four commodities.

The basket includes equal weights of high-grade primary aluminum, grade A copper, primary nickel and special high-grade zinc.

"Investors seem to really be into metals right now," said one market insider. "I would say they're fairly new [in the structured products marketplace]. I wouldn't say they're a novelty, necessarily, but I would say it's pretty easy to follow commodities, especially metals, so that may make them a bit more appealing to investors."

The 39-month notes pay the greater of the jump amount of $390 or par times the participation rate times the basket performance, assuming the basket performance is greater than zero. The participation rate is 100%.

If the basket performance is less than or equal to zero, the investors receive par at maturity.

The initial price of aluminum is $2,650 per tonne, the initial price of copper is $7,990 per tonne and the initial price of nickel is $29,450 per tonne. The initial price of zinc is $3,515 per tonne.

On Aug. 6, aluminum closed at $2,610 per tonne, copper ended at $7,790.50 per tonne, nickel closed at $29,230 per tonne and zinc settled at $3,415 per tonne.

HSBC's reverse convertibles

Moving to reverse convertible offerings, HSBC USA Inc. announced plans to price two down & in worst-of reverse convertible notes with particularly large coupons.

"Folks are looking for big coupons, to make money," said one insider on Tuesday. "Volatility is really helping push these big-coupon notes along."

One of the notes has an annualized coupon of 36.3%. Those notes are linked to Ceradyne, Inc., Force Protection, Inc., Smith & Wesson Holding Corp. and Teledyne Technologies Inc.

The notes have a six-month term and pay par at maturity unless any of the stocks falls below the 70% barrier price during the life of the notes and the worst-performing stock ends below the initial share price. If that happens, the investors will receive a number of shares of the worst-performing stock equal to $1,000 divided by the initial share price.

The notes will price Aug. 24.

The other HSBC note has a 28.2% annualized coupon and also has a six-month term.

The basket includes Apple, Inc. and American Depositary Shares of Companhia Vale do Rio Doce, Petroleo Brasileiro SA and Gerdau SA.

The payout will be par at maturity unless the stock falls below the 80% knock-in level during the life of the notes and the worst-performing stock ends below the initial share price. Should that occur, the investors will receive a number of the worst-performing shares equal to $1,000 divided by the initial share price.

These notes are also set to price Aug. 24.

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