Citigroup prices $185 million in BRIC-linked notes; Wells Fargo sells Apple-linked notes

By Sheri Kasprzak

New York, May 24 - Citigroup Funding Inc. led structured products news on Thursday with the pricing of $185 million in principal-protected notes linked to the BRIC basket of currencies.

The offering, according to one market source based out of New York, is validation that there is still huge investor interest in the BRIC basket.

"It's still amazingly popular," she said. "Obviously with a deal this size, you can see that investors are interested. There's plenty of interest out there, not just with the BRIC basket but also with the individual currencies. Both are getting a lot of attention."

The basket includes equal weights of the dollar/Brazilian real, dollar/Russian ruble, dollar/Indian rupee and dollar/Chinese yuan exchange rates.

200% upside leverage

The one-year notes pay par plus any positive return on the basket, multiplied by the 200% participation rate. The investors can expect to receive at least par at maturity.

Earlier this month, Barclays Bank plc also announced plans to price a similar deal, linked to the BRIC basket.

That offering also had a 200% participation rate and the payout terms are the same as the Citigroup notes.

On May 10, Merrill Lynch & Co. priced $129.43 million in zero-coupon principal-protected notes linked to the basket.

The notes also had a one-year term and the payout terms were the same except that the participation rate was 249.7%.

Currency performance

Looking at the performance of the currencies in the basket against the U.S. dollar, all have made some improvement over the past month.

On April 18, the Brazilian real traded at its lowest exchange rate, at $0.490677 and on May 22, at its highest, at $0.516102. On Thursday, the exchange rate against the U.S. dollar was $0.508906.

The yuan's lowest exchange rate was $0.129291 on April 24 and the highest over the course of the month was $0.130736 on May 23. The yuan/dollar exchange rate closed at $0.130676 on Thursday.

The rupee's exchange rate was $0.0235738 on April 13 and at $0.0249128 on May 22. On Thursday, the exchange rate was 1 rupee versus $0.024341.

At the beginning of May, the Russian ruble's exchange rate was right around $0.0389. On April 23, the exchange rate was about $0.0388 and on Thursday, the exchange rate was $0.0386.

Bear Stearns plans notes

In a similar offering, Bear Stearns Cos. announced recently that it plans to price two-year zero-coupon principal-protected notes linked to a basket that includes the dollar/real, dollar/rupee and dollar/Turkish lira exchange rates.

The payout at maturity will be par plus 600% of the absolute value of any basket decrease. The investors will only receive a gain if the dollar weakens relative to the currencies in the basket.

Investors will receive at least par at maturity.

Wells Fargo's Apple-linked notes

In other structured products news, Wells Fargo & Co. sold $72,631,140 in 8% notes linked to the stock of Apple, Inc. through Lehman Brothers Inc.

The notes pay the cash value of one Apple share, subject to a cap of $136.32695 per $114.85 in principal of notes.

Wells Fargo may choose to settle the payout in Apple shares rather than in cash.

The notes have a one-year term.

So far this May, Apple's stock has traded between $99.47 on May 1 and $113.54 on May 22.

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