JVB, IXIS build on 'Dogs of the Dow' success with second deal, 'Industry Leaders' offering

By Peter Heap and Sheri Kasprzak

New York, Feb. 8 - Eksportfinans ASA's successful "Dogs of the Dow" linked offering from January will be followed up with two deals this month, one linked to the same "Dogs of the Dow" underlyer, the other to an "Industry Leaders" basket.

Distributor JVB Financial Group, LLC and agent IXIS Securities North America Inc. will present the offerings to broker-dealers on Friday at a structured products conference organized by JVB in Colorado.

January's "Dogs of the Dow" deal came in a $10.206 million due to strong demand and the firms involved are hoping that the new structure will once again stand out from the sea of reverse convertible-type deals.

"There were well over 100 deals last month, reverse convertibles," noted Eric Miller, managing director in charge of structured products distribution at IXIS.

But hardly any of those offerings came near the $10 million in size achieved by the "Dogs of the Dow" deal.

"It was very well received," Miller added.

"I think people just want to see something a bit different and something they can talk about and that has a bit more of a theme as opposed to a single stock," he said, referring to the broker-dealers who sell these products to individual investors.

"A lot of dealers never really proactively sold a reverse convertible until 'Dogs of the Dow' came along."

Dealers look for something different

With issuers flooding the market with standard deals, dealers are saying, "I have seen this before, please show me something different," Miller said.

"The market is starting to open up to more innovation."

That view was support by Keith Styrcula, chairman of the Structured Products Association.

"The IXIS 'Dogs of the Dow' transaction through JVB is a first-of-its-kind innovation that symbolizes the potential for structured products to deliver a higher yielding exposure to a well known index," he said.

"Its broad-based distribution success indicates that investors will respond favorably to a creative, value-added structured investment."

The upcoming deal will have a 16.75% coupon and mature on Feb. 28, 2008.

Pfizer, Verizon among stocks

The underlying stocks are Pfizer Inc., Verizon Communications Inc., Altria Group, Inc., AT&T Inc., Citigroup Inc., Merck & Co., Inc., General Motors Corp., E.I. du Pont de Nemours and Co., General Electric Co. and JPMorgan Chase & Co.

At maturity, investors will receive par unless any of the basket stocks fall below the knock-in price - 60% of the initial share price - during the life of the notes and finishes below the initial share price, in which case the payout will be a number of shares equal to $1,000 divided by the initial share price of the least performing stock.

The securities are expected to price on Feb. 23 and settle on Feb. 28.

In the "Market Leaders" deal, Eksportfinans, issuing via agent IXIS and distributor JVB, will sell 10.5% knock-in reverse convertible securities due Feb. 28, 2008 linked to Exxon Mobil Corp., Pfizer Inc. and Wal-Mart Stores, Inc. stock.

At maturity, investors will receive par unless any of the basket stocks fall below the knock-in price - 80% of the initial share price - during the life of the notes and finishes below the initial share price, in which case the payout will be a number of shares equal to $1,000 divided by the initial share price of the least performing stock.

The securities are expected to price on Feb. 23 and settle on Feb. 28.

January's "Dogs of the Dow" deal employed an identical structure to the upcoming February deal, but with a 17.25% coupon and Jan. 31, 2008 maturity.

HSBC plans reverse convertibles

Elsewhere in reverse convertibles news, HSBC USA Inc. intends to price 22.6% reverse convertibles linked to Omnivision Technologies, Inc. and 20.5% reverse convertibles linked to Rambus, Inc.

"Volatility is the watchword when it comes to high coupons," said one market source when asked about the rather large coupons attached the offerings. "That means in either the sector or the reference stock. I think with those names, it probably has more to do with the reference stock."

Other tech names, the market source noted, are being priced with relatively normal coupons. However, he did note that the tech sector is a particularly volatile one.

From the beginning of January through the first part of February, Rambus' stock traded between $17.39 and $23.50, gaining 86 cents on Thursday to close at $23.17 (Nasdaq: RMBS). For the same period, Omnivision's stock traded between $11.27 and $13.25 (Nasdaq: OVTI).

Fluctuations in Rambus' stock have been spurred by battles with the Federal Trade Commission over royalty caps. Earlier this month, the FTC agreed to limit royalties on the company's memory chip technology rather than eliminate the royalties completely.

The six-month Omnivision notes pay par at maturity unless the stock falls below the 75% protection price during the life of the notes and finishes below the initial share price. In that case, the payout will be a number of shares equal to $1,000 divided by the initial share price.

The notes, which are being distributed through JVB, are set to price Feb. 23.

The three-month Rambus notes pay par at maturity unless the stock falls below the 70% knock-in price. At that point, investors will receive a number of shares equal to $1,000 divided by the initial share price. Those notes, also being distributed through JVB, will also price Feb. 23.

© 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.