Barclays plans reverse convertibles linked to mortgage companies; JetBlue may be deal target

By Sheri Kasprzak

New York, March 16 - Heading up structured products news on Friday were two reverse convertible offerings linked to mortgage-related companies from Barclays Bank plc.

"Obviously, we've got a major problem with sub-prime mortgages right now so it really shouldn't surprise anyone to see more [reverse convertible offerings] linked to mortgage lenders," said one market source based in New York. "This is a serious crisis and from everything I'm hearing it's not just going to hurt the mortgage and homebuilding markets."

Of the offerings announced Friday by Barclays, one is linked to IndyMac Bancorp and the other to Beazer Homes USA Inc.

The IndyMac-linked reverse convertibles have a 15% coupon and pay par at maturity unless the stock falls below the 80% protection level and ends below the initial stock price. At that time, the notes pay a number of shares equal to $1,000 divided by the initial share price.

The Beazer-linked notes have an 18% coupon and pay par at maturity unless the stock falls below the 80% knock-in level and ends below the initial share price. Under those circumstances, the notes pay a number of shares equal to $1,000 divided by the initial share price.

On Thursday, Barclays announced a reverse convertible deal linked to mortgage lender Countrywide Financial Corp. That offering matures in six months, has a 15% annual equivalent coupon and a 70% knock-in price.

JetBlue a target for reverse convertibles?

In other structured products news, one equity structurer said he feels JetBlue Airways Corp. may be a target again for reverse convertibles after the airline cancelled more than 200 flights because of a winter storm in the northeast.

"I'm just basing that on the fact that the same thing happened last time they cancelled flights," said the market source. "I'm not saying we've seen anything yet or that anyone has expressed interest. I'm just saying that based on past experience, when they cancelled those flights a month or so ago, they became the reference stock of choice."

JetBlue cancelled 215 flights Friday. The action sent the company's stock down 21 cents to end at $11.69 (Nasdaq: JBLU).

When the airline posted an operating loss for the first quarter following delays from a January snowstorm in the New York metro area, several reverse convertible offerings were announced - although in that case the airline endured several days of chaos, vowed to do better and offered vouchers to passengers.

Barclays priced $3.25 million in notes linked to the stock. ABN Amro Bank NV and Rabo Financial Products BV also negotiated reverse convertibles in February after the announcement.

More recently, JPMorgan Chase & Co. announced plans to price 8.6% reverse exchangeables linked to JetBlue. Those notes are expected to price March 26 and have a 70% knock-in level.

Deutsche Bank plans notes

Elsewhere in structured products news, Deutsche Bank, London Branch said it hopes to price 0% triple opportunity notes linked to an index basket that includes the Dow Jones Euro Stoxx 50, FTSE, S&P 500, Nikkei 225 and S&P/ASX 200 indexes.

The Dow Jones Euro Stoxx 50 index has 26% weight, the FTSE has 26% weight, the S&P 500 has 20% weight, the Nikkei has 20% weight and the S&P/ASX index has 8% weight.

If the basket return is positive, investors will receive par plus triple the return, capped at 19.65%. Investors will share in losses.

The notes are expected to price March 19.

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