Wachovia launches new BRIC-linked product; ABN Amro plans six-month Home Depot-linked offering

By Kenneth Lim

Boston, Jan. 4 - Emerging market-linked deals continued to roll out on Thursday, with Wachovia Corp. launching an offering of zero-coupon principal-protected notes tied to a basket of emerging market currencies.

Meanwhile, ABN Amro Bank NV plans to offer knock-in reverse exchangeable securities linked to the common stock of The Home Depot Inc., which went through an abrupt leadership change earlier in the week.

Emerging market trend continues

Wachovia plans to issue zero-coupon principal protected notes linked to equal weights of the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi relative to the dollar. The notes will price at par of $10 apiece.

Upon maturity, investors will receive the greater of par or the basket performance amount multiplied by a participation rate that has not been determined.

Wachovia Securities is the underwriter.

Wachovia's offering will be the latest in a recent wave of structured products tied to emerging markets. UBS AG recently launched zero-coupon notes due Jan. 30, 2009, that were also linked to the BRIC currencies. Credit Suisse, meanwhile, structured two deals that were linked to a basket of eight currencies - the Thai baht, the Chinese yuan, the Singapore dollar, the South African rand, the Swiss franc, the Canadian dollar, the euro and the Czech koruna all against the dollar.

John Radtke, executive director for sales and trading at distributor Incapital LLC, explained that the popularity of emerging market-linked structured products has been partly fueled by their low risk profile.

Principal-protected products are often offered by AAA rated issuers, and are therefore more palatable to retail investors, said Radtke. Radtke's firm recently helped to distribute deals by Barclays Bank plc that were linked to the BRIC currencies, for example.

"The accessibility and popularity of structured investments in the U.S., especially principal-protected notes, have given retail the opportunity to invest in asset classes that normally would only be available to high net worth individuals and institutions," Radtke said.

"The popularity of equity-linked products and inflation-linked products have given way to interest in emerging markets, which as an asset class have done remarkably well."

In markets such as Florida, where Incapital is based, there is also stronger interest for products that are linked to Brazilian and Latin American currencies, because many investors located nearby have a geographical interest in the region, Radtke explained.

ABN plans Home Depot issue

With Home Depot's abrupt change in chief executives still hot off the presses, ABN Amro is planning knock-in reverse exchangeable securities due July 31, 2007 that are linked to the common stock of the home improvement retailer.

ABN Amro's six-month securities will price Jan. 26, and will pay 5% for an annualized rate of 10%. The payout at maturity will be par unless Home Depot stock falls below the knock-in level - 90% of the initial share price - during the life of the securities and finishes below the initial share price. The pay-out in that case will be a number of Home Depot shares equal to $1,000 divided by the initial share price.

ABN Amro will be the agent.

Robert Nardelli on Wednesday resigned as chairman, president and chief executive of Home Depot. Frank Blake, who was vice chairman and executive vice president at that time, replaced Nardelli as the new chief executive.

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