Wachovia prices $21.593 million in S&P 500 linked notes, Merrill brings $48.088 million

New York, Aug. 3 - Deals linked to the S&P 500 index were prominent in structured products news Friday.

Wachovia Corp. negotiated the terms of a $21.593 million offering of absolute return range notes linked to the S&P 500 index.

The zero-coupon, 100% principal-protected notes have an 18-month term and pay par plus the absolute value of any index performance amount.

The index performance amount will equal $1,000 times the percentage change in the index level, unless an out-of-range event occurs. An out-of-range event occurs if the index is either above the upper barrier or below the lower barrier of the absolute return range from the first trading day after pricing through and including the valuation date.

The upper barrier is 1,760.88, or 121% of the initial index level, and the lower barrier is 1,149.66, or 79% o the initial index level.

The initial level is 1,455.27.

"All you have to do is look at the historical levels of the S&P [500]," said one market source reached Thursday. "You have a good likelihood of avoiding either barrier over the term so you have a pretty good chance of getting the payout."

S&P performance

The Standard & Poor's 500 index closed at 1,270.84 on Feb. 2, 2006, 18 months ago.

On Friday, the index closed down 34.14 at 1,433.06, only 113% of the 1,270.84 closing level 18 months ago.

In July, the index traded between 1,455.27 on July 31 and at 1,553.08 on July 19. In June, the S&P 500 traded between 1,490.72 on June 7 and 1,539.18 on June 4.

Merrill's annual review notes

Meanwhile Merrill Lynch & Co. announced terms on a $48.088 million sale of 0% annual review notes due Aug. 16, 2010 linked to the S&P 500 index via agents JPMorgan Chase Bank, NA and J.P. Morgan Securities Inc.

The notes will be called at increasing premiums if the index is at or above its initial level on any of three annual review dates. The redemption amount will be par plus 10.52% if the notes are called on Aug. 11, 2008, par plus 21.04% if called on Aug. 11, 2009 and par plus 31.56% if called on Aug. 11, 2010.

If the notes are not called, the payout at maturity will be par unless the index declines by more than 10%, in which case investors will lose 1.1111% for each 1% decline beyond 10%.

JPMorgan to bring S&P notes

In addition to deals pricing, JPMorgan Chase & Co. announced plans for a pair of 0% annual review notes due Aug. 19, 2010 linked to the S&P 500 index.

Those deals combine two notable trends of the week - notes linked to the S&P 500 and multiple offerings of deals with very similar structures by the same bank.

Both of JPMorgan's S&P 500 transactions are expected to price on Aug. 6 and settle on Aug. 9.

One series of notes will be called at increasing premiums if the index level is at or above its initial level on one of three annual review dates. The redemption amount will be par plus at least 11.65% if the notes are called on Aug. 15, 2008, par plus at least 23.3% if called Aug. 17, 2009 and par plus at least 34.95% if called on Aug. 16, 2010. The exact redemption amounts will be determined at pricing.

The other notes will be called at increasing premiums if the index level is at or above 95% of its initial level on the first review date and above its initial level on the following two annual review dates. The redemption amount will be par plus at least 10.95% if the notes are called on Aug. 15, 2008, par plus at least 21.9% if called Aug. 17, 2009 and par plus at least 32.85% if called on Aug. 16, 2010. The exact redemption amounts will be determined at pricing.

In each case, if the notes are not called, the payout at maturity will be par unless the index declines by more than 10%, in which case investors will lose 1.1111% for each 1% decline beyond 10%.

J.P. Morgan Securities will be the agent.

ABN Amro's reverse convertibles

In other structured products news, ABN Amro Bank NV announced plans to price 34% knock-in reverse exchangeables linked to IndyMac Bancorp, Inc. and 32% knock-in reverse exchangeables linked to Overstock.com Inc.

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

Those notes pay par at maturity unless the stock falls below the knock-in level during the life of the notes and ends below the initial share price.

The Overstock.com-linked notes have a three-month term and an 80% knock-in level.

The notes also pay par at maturity unless the stock falls below the knock-in level during the life of the notes and ends below the initial share price.

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