Newcomers plan notes linked to commodities, S&P 500 index; UBS prices $21 million index-linked notes

By Sheri Kasprzak

New York, Nov. 14 - Two newcomers to structured products - KfW and Deutsche Bank AG -- grabbed headlines Tuesday with note offerings.

KfW - a German government-linked bank - intends to price three-year notes linked to a basket of commodities via Wachovia Securities. The basket includes equal weights of gold, West Texas Intermediate crude oil, zinc, aluminum, copper, nickel and lead.

Deutsche's new offering

Meanwhile Deutsche Bank will price, later this month, 0% double opportunity notes linked to the S&P.

The two-year notes pay twice the appreciation of the index subject to a maximum return of at least 14%. The exact return limit will be determined a pricing on Nov. 28.

The investors will lose 1% for every 1% the index declines below the initial level.

Agents for the deal are Deutsche Bank Securities and Deutsche Bank Trust Co. Americas.

Commodities popular

In addition to the KfW deal, several other commodities issues were announced Tuesday.

Lehman Brothers Holdings, Inc. announced plans for an offering of single barrier synthetic reverse convertible notes linked to light sweet crude oil.

The investors will receive par plus a 9.05% return unless oil falls below 75% of the initial price during the life of the notes, in which case holders will share in losses.

One market source said Tuesday that crude oil has become a good candidate for reverse convertibles because, since sinking below $60 per barrel, oil prices have remained within a range between $58 and $61 per barrel.

"It's been pretty stable within that range," he said. "It's the same as if you're looking at a particular stock [with which to link a reverse convertible]. You're looking for that range-bound effect."

Even so, the market source noted that crude oil prices do vary and often without much notice.

"All it takes is one news event and you're either up a lot or down a lot, so it's not something you're going to see regularly," he added.

On Tuesday, oil prices slipped by 30 cents to end at $58.28 per barrel.

UBS's $21 million notes

Meanwhile, UBS AG priced a $21 million sale of 0% partial principal-protected notes linked to equity indexes.

The basket includes the S&P 500, the Nikkei 225, the Dow Jones Euro Stoxx 50, the Russell 2000 and the MSCI Emerging Markets.

The S&P carries a 30% weight, the Nikkei a 25% weight, the Euro Stoxx 50 a 25% weight, the Russell a 10% weight and the MSCI a 10% weight.

Payout at maturity is par plus any gain on the basket times a participation rate of 125%. Investors will receive par if the basket loses up to 10% and will share in losses beyond 10%.

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