Goldman prices two notes linked to stock basket and index for Svensk

By Sheri Kasprzak

New York, July 31 - AB Svensk Exportkredit priced two notes linked to a basket of stocks and the S&P Consumer Staples Select Sector Index through Goldman Sachs & Co.

Goldman priced $69.891 million outperformance notes and $36.161 million of enhanced outperformance notes.

Both tranches have a 14-month maturity and are linked to a short position of 57 common stocks within the S&P Consumer Discretionary Select Sector Index, excluding stocks from the automotive, housing and media industries that are subject to announced mergers versus a long position in the S&P Consumer Staples Select Sector Index.

"Obviously, this is for someone who thinks the index will outperform the individual stocks," said one market insider.

Note terms

For the $69.891 million outperformance notes, the payout at maturity will be par plus the amount, if any, by which the index return is greater than the stock basket return. Investors will lose 1% for each 1% that the stock basket return exceeds the index return.

For the $36.161 million enhanced outperformance notes, the payout at maturity will be par plus double the amount, if any, by which the index return is greater than the stock basket return, subject to a maximum return of 36%. Investors will lose 1% for each 1% that the stock basket return exceeds the index return.

The initial long index level is 265.03 and the initial short basket level is 1,000.

At the end of June, the S&P Consumer Staples Select Sector Index had gained 4.89% year-to-date. Since the index's inception in 1998, the index has gained 2.33%, as of June 30.

UBS's PHLX-linked bearish notes

Elsewhere in structured products news, UBS AG priced $36,557,790 in 14-month bearish return optimization securities with partial protection linked to the PHLX Housing Sector.

Assuming the index return is negative, the investors will receive a positive return on the securities equal to the absolute value of the index return multiplied by five, up to a maximum gain of 31.5%.

If the index return is between 0% and 10%, the investors will receive par at maturity and if the index return is greater than 10%, investors will lose 1% for every 1% gain in the index.

Merrill's PHLX-linked notes

In similar deals, Merrill Lynch & Co., Inc. priced $13.75 million in zero-coupon Accelerated Return Bear Market Notes linked to the PHLX Housing Sector index at the beginning of July.

Those notes have a 14-month term and pay par plus triple the absolute value of any decrease on the index. The return is capped at $13.21 per $10.00 unit.

If the index level is equal to or increases by the threshold level of 235.31 or more, investors will receive par at maturity and investors will lose 1% for every 1% gain beyond the threshold level, which is also 10% above the initial level.

Fortis plans reverse convertibles

In other news, Fortis Bank is gearing up to price 20.25% reverse convertible notes linked to AMR Corp.

The notes have a six-month term and have an 80% knock-in level.

At maturity, the notes pay par unless the stock falls below the knock-in level during the life of the notes and finishes below the initial share price.

The notes will be sold through LaSalle Financial Services, Inc.

Stock performance

In July, AMR's stock traded between $24.68 on July 31 and $28.83 on July 24.

The stock ranged between $25.34 on June 7 and $28.47 on June 1.

On Tuesday, the company's stock closed down 67 to end at $24.68.

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