Reverse convertibles market rife with commodities-related stocks; Rabo to price 18.2% notes

By Sheri Kasprzak

New York, April 16 - Kicking off the week in structured products, a number of reverse convertibles offerings coming up are linked to reference stocks with ties to commodities like gold, silver and oil.

"I would say that it has more to do with the [reference] stock than with the actual commodity itself," said one market insider. "You're really looking at the performance of that stock. To a degree, I guess how a particular commodity performs is going to impact the stock. That's a factor but there are other things too."

The offerings are led by an 18.2% reverse convertible linked to Delta Petroleum Corp. from Rabo Financial Products BV. The deal is being sold through LaSalle Financial Services Inc.

The notes, set to price April 27, pay par at maturity unless the stock falls below the 75% knock-in level and finishes below the initial share price.

If that should happen, the notes pay a number of shares equal to $1,000 divided by the initial share price.

So far this month, Delta's stock has traded in a range between $23.62 and $24.11. On Monday, the stock gained 15 cents to close at $24.36, but fell 42 cents in after-hours trading (Nasdaq: DPTR).

Commodities popular elsewhere

Market sources reported last week that commodities have been increasing in popularity as a direct underlyer in structured products offerings.

SG Structured Products, Inc. announced plans late last week to price Commodities Booster Plus notes linked to equal weights of light sweet crude oil, copper, nickel, zinc and aluminum.

And Barclays Bank plc said it will price 100% principal-protected notes linked to a basket that includes reformulated regular gasoline blendstock for oxygen blending, West Texas Intermediate crude oil, gold and natural gas.

One equity structurer pointed out last week that investors are eager for commodities offerings as the prices of certain commodities continue to climb.

On Monday, however, some commodities dipped, with oil down 2 cents at $63.61 per barrel and silver down a penny at $14.08 per ounce. Gold, however, was a big winner on Monday, gaining $4.60 to end at $694.50 per ounce.

Rabo's other offerings

Among the upcoming deals linked to commodity-related stocks, Rabo is gearing up to price 12.3% reverse convertibles linked to Apex Silver Mines Ltd. and 12.6% notes linked to Goldcorp Inc. Both of those notes are expected to price April 27.

The Apex notes have an 80% knock-in level and a three-month term and the Goldcorp notes have an 80% knock-in level and a five-month term.

In another gold-related offering, Rabo announced plans to price 14.4% reverse convertibles linked to Yamana Gold Inc. Those three-month notes have an 80% knock-in level.

Looking at specific stock movements, Apex Silver's stock traded between $13.21 and $15.20 for the month of April and closed up 6 cents at $15.01 on Monday (Amex: SIL). Goldcorp's stock has traded between $24.77 and $26.54 for the month and climbed $22 cents on Monday to end at $26.76 before losing a penny in after-hours activity (NYSE: GG). Yamana's stock has traded between $14.50 and $15.08 so far this April. That stock climbed by 13 cents to close at $15.19 and gained another penny in after-hours trading (NYSE: AUY).

Barclays' commodities deals

In other commodities news, Barclays announced plans to price 13.8% reverse convertibles linked to Titanium Metals Corp., 10.8% notes linked to Peabody Energy Corp. and 9% notes linked to ConocoPhillips Inc.

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

The Peabody-linked notes also have an 80% knock-in level and a one-year term and the ConocoPhillips-linked notes have an 85% knock-in level and a one-year term

EksportKredit prices offering

In other news, AB Svensk EksportKredit has priced a $31 million offering of zero-coupon enhanced exchange rate-linked notes linked to the U.S. dollar/Indonesian rupiah exchange rate.

The notes are being sold through Merrill Lynch, Pierce Fenner & Smith Inc.

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