Merrill prices $162 million Nikkei 225-linked notes; HSBC plans slate of reverse convertibles

By Sheri Kasprzak

New York, Nov. 7 - For the second day in a row, an investment bank announced notes linked solely to the Nikkei 225 index.

This time, Merrill Lynch & Co., Inc. priced $162 million in 0% accelerated return notes linked to the Nikkei. The notes are due Jan. 7, 2008.

"So far the news you're hearing about the Nikkei [225 index] has been mostly positive," said one market source when asked about linking to the Nikkei outside of an index basket.

"If you've got the strength there, it makes it a bit easier to stand alone. Some investors would rather have [notes] linked to just one index rather than a basket, especially if the index is doing well."

The Merrill notes pay triple any gain on the index at maturity, capped at $12.70 for every $10.00 in principal invested. The investors will, however, have full exposure to any decline.

JPMorgan's notes

On Monday, JPMorgan Chase & Co. announced its plans to price 0% annual review notes linked to the Nikkei 225.

Those notes are due Nov. 25, 2009 and will automatically be called at increasing premiums if the index level shows a positive return on any three of the review dates.

The investors will receive par if the notes are not called, assuming the index does not decline by more than 15%. Should the index decline by more than 15%, the investors will lose 1.1765% of their principal amount for every 1% decline beyond 15%.

JPMorgan priced other notes in October linked just to the Nikkei 225, but one market source said Monday that the Nikkei is normally seen linked within a basket of other indexes.

HSBC to price reverse convertibles

Elsewhere, HSBC USA Inc. said Monday it plans to price a roster of reverse convertible notes linked to a variety of reference stocks on Nov. 27.

All of the notes are due Nov. 30, 2007.

The notes include 21% notes linked to Rambus Inc.; 15% notes linked to WebMD Health Corp.; 12% notes linked to Tellabs, Inc.; 8.5% notes linked to St. Jude Medical, Inc.; 9.25% notes linked to Countrywide Financial Corp.; 15.25% notes linked to Continental Airlines, Inc.; 15.25% notes linked to Arch Coal, Inc.; 16% notes linked to Baidu.com; and 9.25% notes linked to Barrick GoldCorp.

The WebMD, Tellabs, St. Jude, Countrywide, Barrick and Arch Coal notes all carry an 80% knock-in price. The Rambus and Baidu.com notes have a 65% knock-in price and the Continental notes carry a 70% knock-in level.

Rambus linked to ABN Amro notes

Rambus was also linked to knock-in reverse exchangeable securities announced last week by ABN Amro Bank NV.

The 19.5% notes are due Nov. 26, 2007 and are set to price Nov. 20. The notes have a knock-in level of 60%.

ABN Amro also priced last week $2.4 million in 20% knock-in reverse exchangeables linked to Rambus.

Those notes, due Oct. 31, 2007, have a 50% knock-in level. The knock-in level for these notes, according to one market source, is well below the standard 70% to 80% knock-in level.

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