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Bank of America and RBC both arrange offerings of STEP Income Securities linked to stocks
By Sheri Kasprzak
New York, April 16 – Two new offerings of STEP Income Securities are in the works, according to filings with the Securities and Exchange Commission.
Bank of America Corp. is on tap to price 10% STEPs linked to the stock of Continental Resources, Inc., and Royal Bank of Canada is expected to price 9.5% STEPs linked to the stock of Splunk Inc., the SEC filings said.
Step payment to be 1% to 5%
Bank of America’s notes are linked to the common stock of Continental, an Oklahoma City-based petroleum liquids producer, and are due in May 2016.
Interest is payable quarterly on the securities.
If the final price of Continental Resources shares is greater than or equal to the step level, the payout at maturity will be par of $10 plus the step payment, which is expected to be 1% to 5% and will be set at pricing. The step level will be 110% of the initial share price.
If the final price is less than the step level and greater than or equal to the threshold level, 95% of the initial level, the payout will be par.
Investors will share in any losses beyond the 5% buffer.
These notes are expected to price and settle later this month.
RBC notes to be tied to Splunk
Alongside these BofA securities, RBC is set to price 9.5% securities linked to the common stock of Splunk. Splunk is a San Francisco-based software developer.
The Splunk-linked securities pay par of $10 plus a step payment of between 1% and 5%, to be determined at pricing, if the company’s stock finishes at or above the step level of 109.5% of the initial price at maturity.
If the stock finishes at or above 95% of the initial level but below the step level, the notes pay par.
Investors are fully exposed to any losses beyond that 5% buffer.
Those notes are also expected to price later this month.
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