JPMorgan plans three deals linked to AIG index; HSBC prices 32.25% reverse convertible on Omnivision

By Sheri Kasprzak

New York, Jan. 30 - JPMorgan Chase & Co. led structured products news Tuesday with plans for three similar offerings all linked to the Dow Jones - AIG Commodity index.

The notes are all 0% buffered return enhanced notes.

The first is a two-year note set to price Feb. 24. That note pays twice any positive return on the index with a cap of at least 37%, to be determined at pricing. If the ending index level declines by 15% or less, payout at maturity will be par and investors can expect to lose 1% for each 1% the index declines by 15%.

Another of the notes, set to price Feb. 6, is due in 18 months and pays 2.3 times any positive return on the index subject to a cap of at least 30%, also to be determined at pricing. If the ending index level declines by 10% or less, payout is par. Investors will lose 1% for every 1% decline beyond 10% in the index.

Finally, the investment bank intends to price another one-year note that pays 1.6 times any positive return on the index subject a cap of at least 30%. If the ending index declines by 15% or less, payout is par and investors will lose 1% for each 1% decline beyond 15%.

HSBC's Omnivision hits 32.25%

Elsewhere, HSBC USA Inc. negotiated the terms of $1.38 million in 32.25% reverse convertible note linked to Omnivision Technologies, Inc.

The three-month notes pay par at maturity unless Omnivision's stock falls below the $9.37 barrier price during the life of the notes and finishes below the initial share price of $11.71. The notes will then pay a number of Omnivision shares equal to $1,000 divided by the initial share price.

The notes pay 8.0265% at maturity for a total annualized coupon rate of 32.25%.

In January, Omnivision's stock traded between $13.25 and $11.27 and on Tuesday, the stock lost 19 cents to close at $11.66 (Nasdaq: OVTI), but gained 4 cents in after-hours activity.

Other Omnivision notes

Earlier this month, Eksportfinans ASA priced $1.035 million in 12% knock-in reverse convertibles linked to Omnivision.

Those one-year notes pay par at maturity unless the stock falls below the $7.084 knock-in price during the life of the notes and finishes below the initial share price of $12.88. Under those circumstances, payout will be a number of shares equal to $1,000 divided by the initial share price.

The notes were sold through IXIS Securities North America Inc.

Lehman cites real notes' high yield

Lehman Brothers Holdings Inc. recently priced a $5 million offering of Foreign Exchange Digital Notes linked to the U.S. dollar/Brazilian real spot exchange rate. One market source said in a previous interview that the notes didn't make sense because the real has been gaining in strength.

A spokesperson from Lehman's FX structured products desk said in an interview Tuesday that the notes, in fact, make perfect sense for just that reason.

"This note gives the investor an opportunity to receive a high dollar yield in a short term instrument for a small appreciation of the Brazilian real against the U.S. dollar," said the Lehman source in response to the comments made Friday by an equity structurer based in New York. "The note pays off if the Brazilian real appreciates by approximately 1% against the U.S. dollar from its current levels."

"Historically low implied volatility in the Brazilian real makes the economics of the principal-protected notes of this type more attractive than in the past," the Lehman source added.

Deal terms

Under the terms of the exchange rate notes, payout at maturity will be par plus 2.34% if the exchange rate is less than or equal to 2.1081 Brazilian reals per U.S. dollar.

On Monday, the exchange rate was 2.1325 reals per dollar and on Friday, the exchange rate was 2.1385 reals per dollar.

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