Svensk's delayed offerings no cause for concern, distributor says; cautious investors leave deals on shelves

By Kenneth Lim

Boston, Dec. 24 - AB Svensk Exportkredit's postponing of several structured product offerings is not a significant concern, a structured product distributor said Wednesday.

"A lot of products have been left on the shelf," the distributor said.

Svensk on Tuesday announced that it will delay several structured notes that were expected to price in December of January.

The affected products include a series of zero-coupon 14-month accelerated return notes linked to the S&P 500 index that will now price in January or February instead of December or January.

Also delayed are zero-coupon 18-month capped leveraged index return notes linked to the S&P 500, to the Russell 2000, to the Nasdaq 100, to the MSCI EAFE and to the Dow Jones-AIG.

All will price in January or February instead of December or January.

Merrill Lynch & Co. and First Republic Co., LLC are the underwriters for the deals.

Slow markets

The distributor said finding capital has been tough in the past couple of months.

"If you're not cash or Treasuries or CDs, you're not doing any business," the distributor said. "A lot of the offerings haven't gone beyond indicative terms."

The percentage of offerings that are priced has never been 100%, but the proportion has increased because investors have been reluctant to explore structured products, the distributor explained.

"I don't think it's just us," the distributor said. "Every asset class, whether its equities, corporate bonds, commodities, all of them have been suffering.

"Particularly in structured products, there's a fear, an unjustified fear if you ask me, of higher complexity and higher risk, which is not necessarily true and oftentimes it's wrong. But that's the environment that we live in today and that's what we have to work with."

The fact that the markets are distracted by the holidays also leads to slower volumes, the distributor said.

"A lot of the customers aren't really working, they're not really looking for anything new at this time, just packing it up and getting ready to start again in January," the distributor said.

Calendar-type items that have simple structures and common underlyings are easier to delay, and with the slow markets over the year-end holidays, pricing is not expected to change much, the distributor said.

"It probably won't make a big difference because things probably aren't going to change very much between now and January," the distributor said.

The distributor did not think that the delay had any implication on Svensk's appeal as an issuer.

"They're still one of the strongest issuers in terms of creditworthiness, so I don't think there's anything to worry about there," the distributor said.

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