UBS delays pricing for variable-coupon principal protection notes linked to UBS Straus

By Jennifer Chiou

New York, Feb. 27 - UBS AG pushed back pricing by one month for its planned issue of variable-coupon 100% principal protection notes due Feb. 20, 2013 linked to the UBS Short Term Rates Automated Strategy (Straus) index, according to an FWP filing with the Securities and Exchange Commission.

The notes are now expected to price on March 26 and settle on March 31. They were originally slated to price on Feb. 26 and settle on Feb. 29.

The index reflects the performance of an algorithmic trading strategy designed to identify and exploit the behavior of short-term interest rates in five financial markets: the dollar, the euro, the British pound, the Japanese yen and the Swiss franc.

The interest rate will be based on the strategy reserve, a hypothetical cash reserve to collateralize a hypothetical 10-times leveraged investment of the principal amount in the index. Initially, 12.75% to 16.75% of the principal amount will be allocated to the strategy reserve, with the exact amount to be set at pricing.

The ending strategy reserve for each quarter will be the starting strategy reserve for that quarter plus par times 1,000% of the index gain for the quarter plus the strategy interest amount for the quarter, less an annual strategy fee of 1.5%. The strategy interest amount will accrue at Libor minus 25 basis points.

For each quarter, the interest rate will be amount by which the ending strategy reserve for that quarter outperforms the initial strategy reserve, subject to a minimum interest rate of 0%.

If the strategy reserve drops to less than 10% of the initial strategy reserve on any trading day during the life of the notes, no interest on the notes will accrue after that date.

Any interest will be payable quarterly.

The payout at maturity will be par plus the final strategy reserve. Investors will receive at least par.

UBS Financial Services Inc. and UBS Investment Bank are the underwriters.

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