RBS brings $55 million of callable step-up notes; Goldman preps S&P Homebuilders offering

By Sheri Kasprzak

New York, Feb. 16 - A large offering grabbed structured products headlines on Thursday. Royal Bank of Scotland Group plc came to market with $55 million of callable fixed-rate step-up notes, one of the largest deals so far this month in what has been a subdued time for new offerings.

The offering was particularly notable because of its size. The largest deal from the previous week was $35.12 million of 9.5% coupon-bearing notes linked to Chesapeake Energy Corp. sold by Bank of America Merrill Lynch for HSBC USA Inc.

One sellsider said the RBS offering was fairly straightforward.

"For what it's worth, it's a pretty standard structure," he said.

"The size is certainly interesting. It gives a big indicator that investors are eager for these sorts of notes. Given the way volume has been the past few weeks, it is significant."

Notes pay 5%, 6% and 8%

The interest rate on the seven-year notes is 5% initially. It steps up to 6% on Feb. 21, 2017 and to 8% on Feb. 21, 2018.

The notes pay par plus accrued interest at maturity or upon early redemption.

Barclays Capital Inc. was the underwriter for the offering.

Goldman plans notes linked to S&P Homebuilders index

Looking to upcoming offerings, Goldman Sachs Group, Inc. is planning a sale linked to the S&P Homebuilders Select index, according to a filing with the Securities and Exchange Commission.

The zero-coupon leveraged index-linked notes will have an 18- to 21-month term. If the index return is positive, the notes pay par plus triple the gain, subject to a maximum payment of $1,276 to $1,324 per $1,000 principal amount. The exact ceiling will be determined at pricing. Investors are full exposed to any losses if the index falls.

That particular index, according to one sellsider, has been reasonably successful in recent months. Given the volatility of the homebuilding sector, however, it's a particularly risky investment, especially given the fact that there is no principal protection.

"It's really hard to say where the index will be in a year or more," he said.

"The fact that there's no principal protection might be a bit much for some [investors]. If you're sure about the industry, it's a good return."

Year over year, the index has gained 16.28%. So far this year, the index has gained 8.78%.

Even so, the index has seen some weakness recently. On Wednesday, the index lost 1.35%, dropping 27.3 points to 1,991.29.

© 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.