Barclays plans bear notes linked to S&P 500; Merrill prices bear notes linked to housing index

By Sheri Kasprzak

New York, June 7 - Barclays Bank plc announced plans this week to price 100% principal-protected bear notes linked to the S&P 500 index.

The notes are not the only bear notes in the market this week - one that has turned out to be a tough one for the equity markets.

Merrill Lynch & Co. Inc. priced $36 million in 0% Accelerated Return Bear Market notes linked to the PHLX Housing Sector index.

"You're sort of operating under the assumption that what goes up, must come down," said one market source of the S&P-linked notes. "The index has performed well, you're right, but it's also been seeing some decline recently."

The S&P-linked notes have an 18-month term. If the index performance is negative, the payout will be par plus the absolute return multiplied by the downside leverage factor equal to 140%.

If the index has a positive performance, the payout is par.

The notes are set to price June 26.

PHLX-linked notes

Merrill's $36 million in notes linked to the PHLX Housing pay triple the absolute value of any decrease on the index, capped at $13.42 per $10.00 in notes.

Should the index make gains up to 10%, the investors will receive par.

The investors will lose proportionally to gains in excess of 10%.

The zero-coupon notes have a 14-month term.

Goldman plans lira basket notes

In other news, Goldman Sachs & Co. announced plans to price 98% principal-protected, zero-coupon notes linked to a Turkish lira basket for AB Svensk Exportkredit.

The basket includes equal weights of the Turkish lira against the U.S. dollar and the Turkish lira against the euro.

Payout at maturity will be 98% of par plus the product of the absolute value of any negative basket return and the initial dollar/lira exchange rate divided by the final dollar/lira exchange rate. The floor is 98% of par.

If the Turkish lira gains, the payout on the notes increases.

The notes are expected to price later this month.

HSBC's down-and-in notes

Elsewhere, HSBC USA Inc. intends to price 5.625% down-and-in worst-of reverse convertible notes and 7.75% down-and-in worst-of reverse convertible notes.

The 5.625% notes have a four-month term and are linked to a basket of American depositary shares of the stock of Companhia Siderugica Nacional SA, TAM SA, Gerdau SA and Companhia Vale Do Rio Doce.

At maturity, investors receive par unless the worst-performing ADS falls below the 80% protection price during the life of the notes and finishes below the initial price. In such a case, the notes pay a number of the worst-performing ADS equal to $1,000 divided by the initial share price.

The notes price on June 26.

The 7.75% notes have a six-month term and are linked to the stocks of Las Vegas Sands Corp., MGM Mirage and Wynn Resorts, Ltd.

Payout at maturity will be par unless the final price of the worst-performing stock is below the 75% protection level and below the initial share price.

If that happens, payout will be a number of shares of the worst-performing stock equal to $1,000 divided by the initial share price.

The notes price on June 26.

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