Merrill plans notes linked to FTSE 100; Citigroup to price notes linked to euro, Swiss franc

By Sheri Kasprzak

New York, June 1 - Merrill Lynch & Co. kicked off June with word that it plans to price zero-coupon buffered return enhanced notes linked to the FTSE 100 index.

The offering is one of several recently linked to the index, which charts the United Kingdom's top companies.

"It's had its ups and downs like anything else but it's an interesting index to watch," said one market source of the FTSE 100. "Over the past few months, it's been up for the most part and everything I'm seeing indicates that will continue.

"When you're pricing something like this, you want this kind of index, one that has historically performed well and one that is expected to continue to do so, obviously."

In fact, in mid-March, the index slumped to 6,000 but is now trading around 6,600, up from about 6,500 in late April.

In March, the index gained 2.4% and for the first three months of the year, the index gained 2%.

On Friday, FTSE 100 gained 55.30 to end at 6,676.70 after a sluggish performance early in the session.

Offering terms

The latest offering of FTSE 100-linked notes have a 16-month term and pay par times double the index return, capped at 15%, assuming the final index level is greater than the initial level.

The notes have a 10% buffer and investors will lose 1.1111% of par for every 1% beyond 10% the index falls.

The notes are expected to price on June 8.

Similar deals

Earlier this week, Merrill priced another offering of return enhanced notes linked to the FTSE 100 for $12.715 million.

Those notes have a 16-month term and pay par times double the index return, capped at 15.1%, if the final index is greater than the initial level.

The notes also have a 10% buffer and investors will lose 1.1111% of their investment for every 1% beyond 10% the index drops.

In early May, Barclays Bank plc priced $13.3 million in buffered return enhanced notes linked to the index.

Those notes also have a 16-month term and pay par times double the index return, capped at 15%.

The notes have a 10% buffer. Investors will lose 1.1111% of par for every 1% beyond 10% the index falls.

Citigroup plans notes

In other structured products news, Citigroup Funding, Inc. is negotiating the terms of a principal-protected note linked to a basket that includes equal weights of the euro and the Swiss franc, each pitted against the U.S. dollar.

The one-year notes pay par plus interest at maturity. Interest is equal to -1 times the basket return percentage times the participation rate, which is expected to be between 190% and 210%.

Looking to the exchange rates, the exchange rate for the euro was $1.3444 on Friday and the rate for the Swiss franc was $0.8130.

A month ago, the exchange rate for the exchange rate for the euro was $1.3600 and a month ago, the exchange rate for the Swiss franc was $0.8231.

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