HSBC gears up to offer global equity index-linked ratchet-up CDs; Barclays plans two reverse convertibles

By Sheri Kasprzak

New York, Oct. 12 - HSBC Bank USA NA led structured products news Thursday after the company announced it will price six-year global equity index-linked ratchet-up semi-annual averaging certificates of deposit through JVB Financial Group, LLC.

The ratchet-up averaging feature is significant to investors, said Steve Peters, vice president of trading and sales at JVB in an interview Thursday, because they will receive protection from erosion in gains on the index.

"The ratchet-up doesn't take into account losses in the index," Peters said Thursday.

Ratchet protects investment

The underlying indexes in this CD include equal weights of the Dow Jones Euro Stoxx 50, Nikkei 225, Hong Kong Hang Seng, Morgan Stanley Capital International Singapore Cash and iShares MSCI Emerging Markets Index Fund.

According to a term sheet released by JVB earlier this week, the CD offers "a unique floored averaging payoff method designed to capture the higher subsequent yearly observations. The minimum value of each fixing level is always greater than or equal to the previous fixing level at each observation date."

If, for example, an index starts at 1,000, Peters said, and in six months grew to 1,500, but dropped to 1,200 just before maturity, the higher level of 1,500 would be automatically locked in.

JVB hopes to sell more CDs

Peters said JVB is hoping to distribute more CDs in the future to broaden its distribution reach, but noted that the number of offerings his firm will distribute depends on what his clients are hoping to accomplish.

"CDs are very popular among retail investors and we wanted to expand our reach," he said. FDIC insurance, among other things, make the CDs more appealing to retail investors, Peters noted.

CDs to price Oct. 25

Looking to the particular terms of the certificate of deposit, HSBC will price the securities on Oct. 25.

At maturity, the investors will receive par plus the average of the five ratcheted average index returns. The ratcheted index returns will be based on the value of the indexes on 12 observation dates. On each observation date, the ratchet value will be set as the greater of the current value of the index or its value at the previous observation date. Investors will receive at least par.

Barclays' reverse convertibles

Elsewhere Thursday, Barclays Bank plc announced its plans to price to reverse convertible notes linked to Las Vegas Sands Corp. and Phelps Dodge Corp.

The Sands notes carry a 13.5% coupon and the Phelps Dodge notes a 14.5% coupon.

Both notes include an 80% protection level and are due Jan. 24, 2007.

Las Vegas Sands and Phelps Dodge have both been linked to reverse convertibles or exchangeables in the past few months.

Back in July, Barclays priced $3 million in 11% reverse convertibles linked to Las Vegas Sands. Those notes carried a 70% protection level.

In August, BNP Paribas negotiated 14.1% down-and-in reverse convertible notes linked to Phelps Dodge. Those notes are due Feb. 28, 2007 and carry an 80% knock-in price.

ABN Amro Bank NV priced $2.5 million in 15% reverse exchangeable notes linked to Phelps Dodge in June. Those notes are due March 7, 2007 and carry a 70% knock-in price.

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