Barclays plans principal-protected notes linked to index basket, reverse convertibles

By Sheri Kasprzak

New York, May 21 - Barclays Bank plc grabbed structured products headline on Monday with principal-protected notes linked to an index basket and with the pricing of a few reverse convertibles offerings.

The index basket-linked notes include a 35% weight of the S&P 500 index, 25% weight of the Dow Jones Euro Stoxx 50 index, 10% weight of the Nikkei 225 index, 10% weight of the S&P/ASX 200 index; 10% of the FTSE/Xinhua China 225 index and 10% weight of the MSCI Taiwan index.

"The way it's structured is interesting," said one market insider when asked about the weightings of the indexes.

"Obviously, the S&P 500 is a great choice for the largest weighting. I think it's a little odd to put the Nikkei with the same weighting as the Xinhua China. The Nikkei typically does carry more weight than that in a basket of indexes. I suppose there is a lot more attention going to the S&P right now."

Index performances

The S&P 500 has gained a lot of strength over the past month. At the beginning of April, the index was trading just below 1,450. On Monday, the index gained 2.35 to close out the session at 1,525.10.

A month ago, the Dow Jones Euro Stoxx 50 index closed around 4,420. Now the index trades around 4,480. The index dropped to below 1,370 in late April.

The Nikkei 225 was trading at 17,452.62 almost exactly a month ago - on April 20. The index closed at 17,556.87 on Monday.

Terms of the notes

The zero-coupon, 4¼ year notes pay par plus the principal amount times the basket performance and the participation rate - expected to be 100% - at maturity if the basket return is greater than 0%.

The investors will receive their investment at maturity if the basket return is less than or equal to 0%.

Reverse convertibles

Barclays also priced two reverse convertibles linked to some popular names.

The investment bank priced a $3 million offering of reverse convertibles linked to Pacific Ethanol, Inc.

The notes have an 18.35% coupon, a three-month term and an 80% protection level.

The notes pay par at maturity unless the stock falls below the protection level during the life of the notes and ends below the initial share price of $14.38.

Barclays also priced $1.25 million in 13% notes linked to Ford Motor Co.

The six-month notes also have an 80% protection level and also pay par at maturity unless the stock falls below the protection level during the life of the notes and ends below the $8.69 initial share price.

Similar offerings

Earlier this month, Barclays priced $2.5 million in 15% reverse convertibles linked to Ford. Those notes had a six-month term and an 80% protection level.

JPMorgan Chase & Co. is getting ready to price 12% notes linked to Ford with a six-month term and an 80% protection level as well.

Barclays last priced an offering of reverse convertibles linked to Pacific Ethanol in September 2006 - for $1 million. Those notes had a 13.5% coupon and a one-year term.

Stock performance

In April, Ford's stock traded between $7.74 - reached on April 19 - and $8.20 - reached on April 26. So far this month, the stock has ranged between $8.05 on May 1 and $8.91 on May 15.

Pacific Ethanol's stock traded between $14.80 on April 30 and $16.50 on April 4. In May, the stock has traded between $13.83 on May 9 and $15.39 on May 11.

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