Wachovia prices $45.566 million absolute return range notes linked to S&P 500

By Sheri Kasprzak

New York, July 2 - Wachovia Corp. led structured products news in this short week ahead of the July 4 holiday with a $45.566 million offering of absolute return range notes linked to the S&P 500 index.

"The range seems pretty wide," said one market source not affiliated with the offering. "Looking historically at what the S&P [500] has done over the past 18 months, I think it's pretty safe to say the barrier, upper or lower, will probably not be breached."

Another market source, an equity structurer based out of New York, also said the likelihood of either barrier being breached is highly unlikely.

"That's a big range," he said. "Something really odd must happen before the index would close above the upper barrier or below the lower barrier. Given the term, I don't see that happening. You're most likely to come away with something more than par here."

No one at Wachovia returned calls for comment on the offering by press time Monday.

Note terms

The 18-month, principal-protected notes pay par plus the absolute value of the index performance, if any, if held until maturity.

The index performance is calculated as $1,000 times the percentage change in the index level unless any out-of-range event occurs. If such an event occurs, the index performance will be zero.

An out-of-range event will occur if the level of the index, at any time on any trading day from the first trading day and including the valuation date, is either above the upper barrier or below the lower barrier.

The upper barrier is 1,806.85 - or 120% of the initial level - and the lower barrier is 1,204.57 - 80% of the initial level.

Index performance

On Monday, the S&P 500 index closed up 16.08 to end at 1,519.43. Eighteen months ago, on Jan. 3, 2006, the index ended at 1,268.80 and a year after that, on Jan. 3, 2007, the index closed at 1,416.60.

A month ago, on June 1, the index closed at 1,536.34.

Deutsche Bank's range notes

In a similar offering, Deutsche Bank AG, London Branch priced $21,712,300 in absolute return barrier notes linked to the MSCI EAFE index.

The index charts the performance of stocks from 21 developed countries in Europe, Australia, Asia and the Far East.

The 18-month notes pay par plus the absolute value of the index return if the index does not end 26.5% above or below the initial index level during the life of the notes.

If the barriers are broken, investors will receive par at maturity.

Performance of index

Eighteen months ago, on Jan. 3, 2006, the MSCI EAFE index closed around 1,750. A year go, on July 1, 2006, the index closed just above 1,800 and on Monday, the index closed at 2,278.465.

Bank of America to do reverse exchangeables

In other structured products news, Bank of America announced Monday that it plans to join the many banks already selling reverse exchangeable notes.

According to a product supplement filed Monday with the Securities and Exchange Commission, the notes will pay an amount equal to the initial price level but under certain circumstances, the notes may pay a number of shares equal to the exchange ratio or the cash value of those shares.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.