RBC to price 19.15% reverse convertibles linked to Overstock.com; UBS plans offering of call warrants

By Sheri Kasprzak

New York, March 14 - Royal Bank of Canada led structured products news on Wednesday with its plans to price 19.15% reverse convertible notes linked to Overstock.com, Inc.

The investment bank also intends to price zero-coupon principal-protected notes linked to a basket of commodities.

Overstock.com has become a relatively popular reference stock for reverse convertibles lately.

On March 6, HSBC USA Inc. announced plans to price 18.75% in reverse convertibles linked to the stock and in January, Rabo Financial Products BV said it would price notes linked to Overstock as well.

Under the terms of the RBC offering, the one-year notes pay par at maturity unless the stock falls below the 50% knock-in price during the life of the notes and finishes below the initial share price. In that case, payout will be a number of shares equal to $1,000 divided by the initial share price.

The notes are set to price March 27.

Terms of other offerings

The HSBC notes announced earlier this month are three-month notes and pay par at maturity unless the stock falls below the 80% protection price and finishes below the initial share price. In that instance, payout will be a number of Overstock.com shares equal to $1,000 divided by the initial share price.

Those notes are scheduled to price March 23.

The Rabo notes linked to Overstock.com are also three-month notes.

The notes pay par at maturity unless the stock falls below the 70% knock-in level and finishes below the initial share price, in which case payout will also be a number of shares equal to $1,000 divided by the initial share price.

RBC's commodity-linked notes

In other news at RBC, the investment bank intends to price zero-coupon principal-protected booster plus notes linked to a basket of commodities.

The basket includes equal weights of aluminum, nickel, zinc and crude oil.

Payout on the four-year notes will be par plus the greater of any gain on the basket or 25%. If the basket declines by up to 25%, payout will be 25% plus the percentage change. Investors receive par for any losses beyond 25%.

The notes are expected to settle March 30.

RBC also announced a large number of other reverse convertible offerings linked to any array of different stocks.

UBS to price call warrants

Finally, UBS AG said it plans to price call warrants linked to a basket containing equal weights of the Dow Jones Euro Stoxx 50, FTSE/Xinhua China 25, Nikkei 225 and S&P 500 indexes.

"All of those indexes are solid indexes," said one market source when asked about the call warrants on Wednesday.

"It's a basket you see from time to time so it's not that uncommon. I don't know how many times I've seen it linked to call warrants before but don't let that throw you."

The warrants are set to expire March 25, 2011 with the exact expiration to be determined at pricing on March 26.

The warrants will automatically be exercised on the expiration date if the final basket level is greater than the initial basket level. Investors will receive the notional amount of between $58.82 and $64.52 per warrant, multiplied by the return on the basket.

The notional amount is equal to the issue price of $10.00 per warrant divided by the warrant premium, expected to be between 15.5% and 17%.

Investors will lose part of their investment if the basket return is positive but less than the warrant premium. If the final basket level is less than or equal to the initial basket level, the warrants will expire worthless and investors lose their entire investments. Investors may not exercise their warrants before the expiration date.

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