Deutsche Bank links notes to S&P 500; Eksportfinans sells $126.7 million of notes linked to homebuilders

By Kenneth Lim

Boston, Aug. 5 - Deutsche Bank AG dominated the calendar Tuesday with a couple of principal-protected absolute return barrier notes with minimum returns linked to the S&P 500 index.

Meanwhile, Eksportfinans ASA appears to have had success with its buffered notes linked to the S&P Homebuilding Select Industry index.

Deutsche Bank links to S&P 500

Deutsche Bank, through its London Branch, is offering two series of zero-coupon principal-protected absolute return barrier M-notes linked to the S&P 500 index.

The notes will be sold at par of $1,000.

At maturity, the series due Feb. 26, 2010 will pay at least par plus a minimum return of 1.5%. During the life of the notes, if the underlying index never closes above the upper barrier level of between 19% and 22% of its initial level and never closes below the lower barrier level of $15, at maturity investors will receive par plus the absolute index return, subject to the minimum 1.5% return.

The series due April 29, 2010 has a similar structure, but its upper barrier level will be between 19.6% and 22.6%.

The upper barrier levels will be set at pricing for both series.

Minimum return not substantial

An investment advisor said the minimum return feature of the notes did not significantly alter the assessment of the product.

"Offering me 1.5% over 18 or 21 months isn't going to do much," the advisor said. "It's slightly better than just returning my principal if the barriers are broken, but 1.5% isn't that much better."

But the advisor said the product would offer some protection against a weak equity market.

"I think this would fit a strategy where it's kind of 50-50 in terms of whether the market's going to go up or down, but in general you think it's staying range-bound," the advisor said. "I wouldn't look at it as necessarily an investment that will necessarily help me to outperform the market, more like something that provides downside protection."

The note will give a positive return as long as the S&P 500 closes within the relevant ranges, but the unleveraged returns may not be ideal if investors are seeking better yields, the advisor said.

"A leveraged note that's just one-directional will give you a better return, but you have to give up your returns on the other side," the advisor said.

Eksportfinans sells $126 million of notes

Eksportfinans priced a notably large offering of $126.7 million of buffered notes due Sept. 21, 2010 linked to the S&P Homebuilding Select Industry index. The notes were sold through Goldman Sachs.

The index tracks U.S-listed stocks of companies that are involved in the homebuilding industry.

The notes, which were offered at par of $1,000, will return par plus the underlying index return at maturity if the underlying index ends above its initial level of 1,675, subject to a maximum total payout of 164% of the principal. If the index is flat or ends below 1,005, investors will receive par. If the index ends below 1,005, investors will lose 1.67% for every 1% that the index declines below the buffer level of 1,005.

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