Reverse convertibles to be popular in coming week; Rabo, Barclays, Amro all plan deals

By Sheri Kasprzak

New York, Nov. 10 - Reverse convertibles will remain popular in the structured products market in the week to come, equity structurers said Friday.

"Earnings did play a big part," said one equity structurer when asked about the impact of earnings season on reverse convertibles and determining what reference stocks are appropriate for those deals.

"You get a good idea of how their stock responds to news events like earnings and you can just follow the range to see if the stock is going to move up or down and how much. You want something that's not going too far in either direction."

Another market source said he feels earnings may have sparked a demand for reverse convertibles but noted that investors have been seeking reverse convertibles for quite some time now.

"For the better part of this year, reverse convertibles have been hot," he said.

The market source added that earnings may play a part in determining which stocks are being linked to these notes.

Rabo, Amro, Barclays have deals

Rabo Financial Products BV, Barclays Bank plc and ABN Amro Bank NV all have reverse convertible offerings set to price later this month.

Rabo plans to link reverse convertibles to Advanced Micro Devices, Inc.; Titanium Metals Corp.; Alcoa Inc.; Qualcomm Inc.; TD Ameritrade; Peabody Energy Corp.; Joy Global Inc. and Jetblue Airways.

Barclays intends to price notes linked to Elan Corp.

ABN Amro said it plans to price notes linked to General Motors Corp., Rambus Inc., Caterpillar Inc. and Celgene Corp.

Terms of the notes

The AMD notes to be priced by Rabo bear interest at 18% annually, are due Feb. 22, 2007 and carry an 80% barrier level. Those notes will price Nov. 17.

The Titanium notes are due May 22, 2007, bear interest at 20% annually and carry an 80% barrier. Those notes also price on Nov. 17.

The Alcoa, Qualcomm, TD Ameritrade, Peabody, Joy and Jetblue notes are all set to price Nov. 20 and are all due Nov. 26, 2007.

The 9.25% Alcoa notes have an 85% barrier, the 12% Qualcomm notes an 80% barrier, the 13% TD Ameritrade an 80% barrier, the 15% Peabody notes a 75% barrier, the 16% Joy Global notes a 70% barrier and the 17% Jetblue notes a 70% barrier.

Barclays, ABN notes

The Elan notes Barclays intends to price on Nov. 17 carry a 20% coupon and an 80% barrier level.

The 19.5% Rambus notes ABN Amro plans to price on Nov. 20 are due Nov. 26, 2007 and carry a 60% barrier and the 13% GM notes are also due Nov. 26, 2007 and carry a 70% barrier level. The Caterpillar notes bear interest at 9% annually, are due Nov. 26, 2007 and carry an 85% barrier level and the 12.25% Celgene notes are also due Nov. 26, 2007 and carry a 70% barrier level

Index-linked notes may be popular

One market source reached Friday said in the coming week, index- and index-basket linked notes may gain some popularity.

"A lot of stuff now does seem to be linked to the Nikkei [225]," he said.

"Before you were seeing it liked as part of a global basket but not as much these days. Most of the global indexes are going to be linked to baskets. Look for some stuff to be linked to the S&P 500 [index] as well."

Speaking of deals linked solely to the Nikkei 225, JPMorgan Chase & Co. plans to price early in the coming week 0% buffered return enhanced notes linked to the Nikkei. Those notes are due Nov. 21, 2007.

Bank of America plans to price 0% notes linked to the Dow Jones Euro Stoxx 50 and Nikkei 225 indexes. That bank also intends to price 0% minimum return equity appreciation growth linked securities linked to the Dow Jones Industrial Average, the S&P MidCap 400, the Dow Jones Euro Stoxx 50, the Nikkei 225 and the S&P Small Cap 600 indexes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.