Barclays to price FTSE 100-linked notes; Lehman sells $10 million pyramid notes linked to gold, silver

By Sheri Kasprzak

New York, Aug. 24 - Barclays Bank plc rounded out the week in structured products with word that it plans to sell buffered return enhanced notes linked to the FTSE 100 index.

In other news, Lehman Brothers Holdings, Inc. announced the terms of a $10 million offering of pyramid notes linked to gold and silver.

Meanwhile, ABN Amro Bank NV priced $1 million in 31% knock-in reverse exchangeable securities.

Of the Barclays notes, one market source said Friday that he has seen several offerings linked solely to the FTSE 100 index.

"U.S. investors are becoming more and more confident with the FTSE 100 index," he said. "It has been a reasonably stable index and I think that volatility in the U.S. stock market may make an index like this a little more appealing."

Barclays' notes

The FTSE 100-linked notes from Barclays have a one-year term and pay par times double the index return, subject to a 14.9% maximum return, assuming the final index level is greater than the initial level.

The principal is protected up to a 10% decline in the index. If the index does fall beyond that buffer, the investors will lose 1.1111% of their investment for every 1% drop beyond 10%.

JP Morgan is the placement agent.

Earlier offerings

This week, Merrill Lynch & Co. priced $9.97 million in buffered return enhanced notes linked to the FTSE 100 index.

Those notes have a 13-month term and pay par times double the index return of the FTSE 100 index at maturity if the final index level is greater than the starting level. The return is capped at 114.6% of the initial investment.

The notes are protected up to a 10% decline in the index and investors will lose 1.1111% of their investment for every 1% decline beyond the 10% buffer the index falls.

Barclays priced $11.015 million in similar notes linked to the FTSE 100. Those notes have a 16-month term and also pay par times double the index return with a cap of 15.8%.

The Barclays notes have a 10% buffer and investors will lose 1.1111% of their investment for every 1% beyond the buffer the index drops.

Index performance

On Friday, the FTSE 100 index gained 23.20 to close at 6,220.10.

A month ago, on July 23, the index ended the day at 6,624.40 and a month before that, on June 22, the index closed at 6,567.40.

Lehman's pyramid notes

In other structured products news, Lehman Brothers priced $10 million in pyramid notes linked to gold and silver.

At maturity, the payout will be par times 102.5% minus the discount factors for gold and silver, both of which are capped at 17.5%. Investors will share in any losses.

If the final prices for gold and silver are greater than the upper boundaries, the discount factor for each asset will be determined using the change in the final price relative to the upper boundary. If the final prices for gold and silver are lower than the lower boundaries, the discount factor for each asset will be determined using the change in the final price relative to the lower boundary.

The gold upper and lower boundaries are $730.00 and $500.00, respectively. The silver upper and lower boundaries are 1,500 cents and 950 cents, respectively.

ABN Amro prices reverse convertibles

In other structured products news, ABN Amro priced late Thursday an offering of $1 million in 31% knock-in reverse exchangeable notes linked to the stock of CIT Group, Inc.

The three-month notes pay par at maturity unless the stock falls below the 70% knock-in level during the life of the notes and end below the initial share price of $35.05.

Tim Mortimer, managing director of Future Value Consultants, said in a recent interview that if the U.S. credit market does experience some improvement in the coming weeks or months, big coupons like the one attached to the CTI Group-linked notes may become rarer.

"It's not a matter of whether there will be fewer," Mortimer said. "The coupons may get smaller."

Another market insider reached Friday agreed.

"There's no question that investors are still hungry for reverse convertibles," he said. "If things do get better, and I think it's too early to really tell anything for certain, you may find smaller coupons. Volatility drives these big-coupon notes and once the volatility levels off, the coupons drop."

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