Goldman prices $100 million and $50 million notes linked to GSCI Enhanced Strategy Excess Return

By Sheri Kasprzak

New York, Feb. 16 - The Goldman Sachs Group Inc. capped off the week in structured products with two sizable notes linked to the GSCI Enhanced Strategy Excess Return.

The largest - for $100 million - is a 0% enhanced participation strategy-linked note and pays triple any strategy return, capped at 134.5%. Investors are exposed to any losses.

The second note - for $50 million - is also a one-year 0% enhanced strategy-linked note. This note, however, pays 95% of par plus a supplement equal to 123% of any return on the strategy. The supplement is capped at 36.9% and has a floor of zero, for a maximum payout of 131.9%. If the strategy return is less than 4.065%, investors will receive less than par but at least 95% of par.

Deals announced in twos

The Goldman offerings weren't the only deals to be announced or priced in twos. Hartford Life Insurance Co. announced plans to price two principal-protected notes linked the S&P 500 index and - in a case of not quite so identical twins - JPMorgan Chase & Co. priced a note linked to the S&P 500 and the Nikkei 225 as well as the Nikkei 225 and the Dow Jones Euro Stoxx 50 indexes.

"I think it's probably a coincidence," said one equity structurer based in New York when asked why so many deals are being priced in pairs. "Those [the S&P and the Nikkei] are common and I really can't see any particular reason why notes would be priced that way [in twos]."

Offering terms

One of the Hartford notes linked the S&P is a zero-coupon principal-protected note set to price Feb. 28. The notes pay par at maturity plus any gain on the index multiplied by a participation rate expected to be at least 101%. Investors will receive at least par.

The other Hartford notes are 2% principal-protected notes also set to price Feb. 28. Those notes also pay par plus any gain on the index multiplied by a participation rate that is expected to be at least 156%.

Bear, Stearns & Co., Inc. is the agent on both deals.

JPMorgan priced $1.655 million in 0% lesser index principal-protected notes linked the Nikkei 225 and the S&P 500 indexes.

Those notes pay par plus triple the lesser index return, subject a maximum return of 11.4%. Investors will receive at least par at maturity.

The investment bank also priced $6.47 million in 0% lesser index principal-protected notes linked the Nikkei and the Euro Stoxx indexes.

Those notes also pay par plus triple the lesser index return, subject to a 12% cap. Investors will also receive at least par in these notes.

Reverse convertibles, principal-protected popular

Looking ahead, one market source said he feels reverse convertibles will continue to be popular going forward this year while another said principal-protected notes are the place to be.

"Everyone is looking at [reverse convertibles] now," said one market source. "The income is very attractive to investors."

Still, another market source said he feels principal-protected notes are going to gain in popularity.

"We're doing mostly principal-protected," he said, adding that it's a feature many investors find a deal of comfort in.

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