UBS sells biggest non-listed index-linked offering ever with $946.2 million notes linked to Russell 1000 Growth

By Emma Trincal

New York, May 17 - UBS AG, London Branch sold the biggest note linked to an index on Wednesday, according to data compiled by Prospect News.

UBS priced $946.2 million of 0% Fisher enhanced big cap growth securities due May 28, 2013 linked to the Russell 1000 Growth Index Total Return, according to a 424B2 filing with the Securities and Exchange Commission.

Record size

Exchange-traded notes have been brought to the market in bigger sizes, but the UBS product is not an ETN and it is not listed on any exchange, according to the prospectus.

Some rates products can be larger as well, but they fall into the plain-vanilla category. They may offer a structured coupon but have no underlier. Examples include step-up notes, step-down notes, fixed-to-floating notes and capped floaters.

According to Prospect News data, the UBS notes are the biggest equity-linked product ever sold in the United States with the exception of two single-stock-linked notes.

One, also priced by UBS, sold in February 2006. It was a $2 billion mandatory exchangeable note linked to Time Warner Inc. shares. The second was Citigroup Funding Inc.'s $989.48 million mandatory exchangeable note linked to Genworth Financial Inc. shares.

One institution

"This was a one-client mandate. It was done at the request of one institutional investor," a market participant familiar with the deal told Prospect News without being more specific.

The notes offer a double-long position in the underlying index. The Russell 1000 Growth Index Total Return measures the composite price performance of stocks of the largest 1,000 companies included in the Russell 3000 index and reinvests cash dividends on the ex-date.

At maturity, investors will incur an index adjustment factor. A redemption fee of 0.05% will apply upon early redemption.

The securities will be automatically called if the underlying index level falls below 70% of the initial level and a market disruption event is not occurring. The notes are also putable.

The notes (Cusip: 90268U176) will settle on Monday.

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