Credit Suisse plans to offer oil fund-linked notes; JPMorgan preps oil, gas ETF-linked offering

By Sheri Kasprzak

New York, Jan. 8 – Leading Thursday’s structured products offering announcements was an offering from Credit Suisse AG linked to two energy funds, and the deal could be intended for investors who feel oil prices will climb within the next two years.

“Certainly it could be something investors who feel oil prices are headed for a spike in the next couple of years might be interested in,” said one market insider reached Thursday afternoon.

“I’d say for the short term, all the data on oil indicates prices will continue to fall, but two years is a pretty long horizon for a commodity like oil. It’s very sensitive to a variety of factors.”

The Credit Suisse zero-coupon accelerated barrier notes are linked to the United States Oil Fund, LP and the Energy Select Sector SPDR fund.

Over the past five years, the United States Oil Fund has fallen by 5.51%, and since its inception in April 2006, it has declined by 49.09%, according to September data, the latest available. The fund tracks daily movements of West Texas Intermediate crude oil, the U.S. benchmark.

The Energy Select Sector SPDR fund, which uses the S&P Energy Select Sector index as its benchmark, has gained 8.93% over the past five years and 9.7% since its inception in December 1998, according to data from Nov. 30, the latest available.

Notes pay par plus 150%

The notes will mature sometime between Jan. 25, 2017 and July 25, 2017, with the exact maturity to be set at pricing.

If each fund finishes at or above its initial level, the payout at maturity will be par plus 150% of the return of the worst-performing fund.

If the worst-performing fund falls but finishes at or above its 60% knock-in level, the payout is par. Otherwise, investors are exposed to any losses of the worst-performing fund.

The notes will price Jan. 20.

JPMorgan preps energy notes

The Credit Suisse notes aren’t the only energy-related offering on the horizon. On Friday, JPMorgan Chase & Co. is on deck to price zero-coupon trigger jump securities linked to the SPDR S&P Oil & Gas Exploration & Production exchange-traded fund.

Assuming the fund finishes at or above the initial share price, the payout at maturity will be par plus the upside payment of at least $1.95 per $10.00 security. The exact upside payment will be set at pricing.

Investors receive par at maturity if the share price falls by up to 10% and will be fully exposed to losses from the initial price if the fund finishes below the 90% downside threshold level.

Over the last five years, the fund gained 6.79%, but it lost 16.08% between Nov. 1 and Nov. 30.

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