Citigroup prices $104.3 million ELKS linked to ADM; Barclays, Rabo plan Whole Foods-linked notes

By Sheri Kasprzak

New York, Nov. 27 - Citigroup Funding Inc. started the post-Thanksgiving holiday week with the announcement that it had priced a $104.3 million offering of Equity Linked Securities tied to the stock of Archer-Daniels-Midland Co. The investment bank has two other ELKS lined up for pricing as well.

"[ELKS] are popular for the same reason reverse convertibles are," said one market source.

"Investors these days want something that provides an income. These are targeted to a certain type of investor; most of them are looking for that coupon, they're looking to make an income."

The market source noted that, as with reverse convertibles, investors in ELKS want to find a stock that they don't expect to move up or down too much.

"You want something that stays nice and steady," he added.

Citi's ADM offering

The Archer-Daniels-Midland one-year notes priced Monday carry a 9.5% coupon and pay par in cash unless the company's stock hits the trigger price of $27.256 during the life of the notes. If the trigger price is hit, the notes pay a number of shares equal to par divided by the initial share price.

Through the month of October, ADM's stock traded between $36.66 and $39.87. So far this November, the stock has traded between $33.53and $36.61. On Monday, the stock gave up 54 cents to end at $32.99 (NYSE: ADM).

Citigroup is also gearing up to price ELKS linked to the stock of Best Buy Co., Inc. and Yahoo! Inc. So far this November, Best Buy's stock traded between $51.39 and $55.84. On Monday, the stock lost 71 cents to end at $54.37 (NYSE: BBY). In November, Yahoo!'s stock traded between $25.99 and $28.49. The company's stock gave up 76 cents to end at $27.27, losing another 4 cents in after-hours trading (Nasdaq: YHOO).

Barclays prices Whole Foods notes

Elsewhere in structured products news, Barclays Bank plc is gearing up to price 11.5% reverse convertibles linked to Whole Foods Market Inc.

The coupon on the latest offering is slightly off from the 12.5% reverse convertibles sized at $2 million priced last week with a six-month maturity and a 75% trigger. However, the coupon is better than the $1.5 million of 9.5% reverse convertibles also priced last week, that deal carrying a six-month maturity and a 70% trigger.

"I would say, yes, coupons are starting to settle down a bit in terms of size, but it's still going to take a little while," said one equity structurer when asked about declining coupons. "For a while there, coupons were getting pretty substantial in size but that is changing."

The reason for that, another market source said a week ago, is a shift in volatility. Stocks had been quite volatile, pushing those huge coupons. Now stock volatility is cooling, bringing back smaller coupons, the market source noted at the time.

The latest Barclays Whole Foods-linked seven-month notes carry an 80% protection level.

Rabo's Whole Foods notes

Similarly, Rabo Financial Products BV announced its plans to price 13% reverse convertibles linked to Whole Foods, coming to market via LaSalle Financial Services, Inc.

The seven-month notes carry an 80% protection level.

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