Citi sells $46.88 million notes linked to American Express; Eksportfinans sizes $11.83 million reverse convertible

By LLuvia Mares

New York, Sept. 19 - Movement in the structured products market was steady Wednesday with several banks making large transactions.

Citigroup Funding Inc. led structured products news after pricing a significantly large $46.88 million issue of 8.75% Equity LinKed Securities (ELKS) due Sept. 25, 2008 linked to the common stock of American Express Co., according to a 424B2 filing with the Securities and Exchange Commission.

Interest is payable semiannually.

"Investors are betting that American Express is not going to go down appreciably," said a market observer. "It's a healthy-size of a deal for Citigroup and the fact that it is linked to American Express, a good solid company, and the volatility and financials of it will allow a good payout."

The payout at maturity is par unless American Express stock falls by 20% or more during the life of the securities, in which case the payout will be a number of American Express shares equal to $10.00 divided by the initial share price or, at the holder's option, the equivalent cash value.

"If American Express stays pretty steady between now and during the one-year life of the notes, it's a decent payout for the financial bank," he said. "It's not a spectacular payout it's not a double digit but its good bet."

Citigroup Global Markets Inc. is the underwriter.

Eksportfinans sells $11.83 million notes

In other news, Eksportfinans ASA sized an $11.83 million issue of 11% reverse convertible notes due March 19, 2008 linked to Merrill Lynch & Co. common stock via agent Morgan Stanley & Co. Inc.

Interest is payable monthly.

A market observer said the company picked an interesting time to make a deal of this type.

"An $11 million deal in the Morgan Stanley system isn't a significant-size deal but there is good volatility value to be captured," he said.

The payout at the maturity will be par unless the stock falls by more than 20% during the life of the notes and finishes below the initial share price, in which case the payout will be a number of Merrill Lynch shares equal to $1,000 divided by the initial share price or, at the issuer's option, the equivalent cash value.

Morgan Stanley brings mortgage deal

Morgan Stanley brought a modestly sized $2.61 million of bear market auto-callable securities due April 8, 2009 linked to inversely KBW Mortgage Finance Index - but the final amount does not compare to larger transactions made by the company recently.

The company priced $3.65 million in a similar structure on May 23.

The KBW Mortgage Finance index is a float-adjusted modified capitalization-weighted index of 24 companies designed to represent the performance of the U.S. mortgage finance industry.

If the closing value of the index is less than the initial value on five quarterly determination dates, the securities will automatically be redeemed at increasing premiums, starting at 105.25% if called on Jan. 3, 2008 and rising to 126.25% of par if called on Jan. 3, 2009.

If the securities are not called, the payout at maturity will be 131.5% of par if the final index level is less than the initial index level.

If the final level is greater than or equal to the initial level but the index has stayed below the trigger level - 120% of the initial level - during the life of the securities, the payout will be par.

Otherwise, investors will lose 1% for each 1% that the final level exceeds the initial level.

Morgan Stanley & Co. Inc. is the agent.

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