Citigroup prices $91 million in metal-linked notes; Barclays plans JetBlue-linked reverse convertibles

By Sheri Kasprzak

New York, Feb. 21 - Citigroup Funding Inc. priced a series of notes Wednesday linked to a variety of metals.

One market source found it interesting that the notes linked to copper are the biggest portion of the series with $31 million.

"Copper has been really rocky lately," he said. "I suppose there is some sentiment that it can only get better and that is a good bet. It's not that I think copper is particularly unpopular but I just think the timing is interesting. A lot of what copper does depends on what gold does."

Citigroup also priced a $23 million note linked to nickel, a $17 million note linked to aluminum, an $11 million note linked to zinc, a $5 million note linked to lead and a $4 million note linked to tin.

Terms of notes

The 15-month notes bear interest at 4.45% annually.

The payout at maturity depends upon the ratio between the London Metal Exchange's cash settlement price of the particular metal on the third business day before maturity and the closing price of that metal's LME 15-month forward contract on the pricing date - Wednesday.

That formula makes the notes a play that the underlying metals will rise in price faster than the forward contracts are currently predicting.

Barclays plans JetBlue-linked notes

Elsewhere in structured products news Wednesday, Barclays Bank plc negotiated a $3.25 million reverse convertible note linked to JetBlue Airways Corp.

The offering comes on the heels of news that JetBlue expects to post an operating loss for the first quarter following delays after a snowstorm in New York earlier this month.

The airline announced that it expects a first-quarter operating margin of negative 4% to negative 2%. The company had originally expected an operating margin of 2% to 4%.

JetBlue has been plagued with problems after the recent snowstorm in the northeast United States almost crippled the airline following delays. The company is currently trying to win back its passengers by offering refund vouchers.

On Wednesday, the company's stock rebounded, gaining 2.25%, or 29 cents, to settle at $13.19 (Nasdaq: JBLU) after losing 66 cents Tuesday to close at $12.90. Throughout January, the stock traded between $16.62 and $13.68.

JetBlue deal terms

Under the terms of the 19.85% notes, investors will receive par at maturity unless the final price of the stock is lower than the initial share price and if the share price is below the protection price any day between the initial valuation date and the final valuation date. If this occurs, investors will receive a cash amount equal to par reduced by the percentage decrease in the price of the stock or a number of shares, to be paid in cash, equal to the fractional shares multiplied by the final price.

The notes carry a 75% protection level.

The investors may lose some or all of their investment.

Other JetBlue deals

In other offerings linked to the airline, ABN Amro Bank NV announced its plans to price 22.5% Knock-In Reverse Exchangeable Securities linked to the company. Those notes have an 80% knock-in level.

Also, Rabo Financial Products BV said it plans to price later this month 13.45% knock-in reverse convertibles linked to the stock. Those one-year notes are set to price Feb. 23 and have a 70% knock-in price.

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