Reverse convertibles continue popular; Apple, Yahoo, SanDisk, AMD among planned Rabo deals

By Sheri Kasprzak

New York, Oct. 2 - Structured products activity was led again Monday by a slate of reverse convertibles linked mostly to energy and technology names.

"I think it probably has more to do with individual [companies] than the business they do," said one market source when asked about the significance of the sectors and the current market conditions.

"Of course what the sector is doing is going to affect those single companies, but investors need to look at specific names, not just what oil is doing or what technology is doing.

"You'll get more information from what certain stocks are doing over a certain range than what the sector as a whole is doing and that information will be a lot more helpful."

Another equity structurer, however, said that argument doesn't make sense.

"How can you say that [the] sector is not even worth looking at?" he asked.

"It seems to me that whatever the sector is doing is a good indication of what the stocks are doing. It's not absolute, but to say it doesn't matter doesn't make much sense to me. You really need to look at both."

On Friday, another source, agreeing with the sector name, noted the recent abundance of reverse convertibles linked to energy and technology names.

Monday's announcements included notes linked to names that have been rather popular recently.

Among Monday's deals were notes linked to Chesapeake Energy Corp., Yahoo! Inc. and Qualcomm, Inc. - all companies that have been used as underlyers for other recent reverse convertible notes.

Last week alone, HSBC USA Inc. priced $554,000 in 11% reverse convertibles linked to Chesapeake and Barclays Bank plc priced $4 million in 12% reverse convertible notes linked to Yahoo! Inc. In late July, ABN Amro sold $1.9 million in 12% knock-in reverse exchangeables linked to Qualcomm. Amro also priced $1.3 million in 11% knock-in reverse exchangeable notes linked to Apple in late September.

Rabobank's tech-linked notes

Heading up a large chunk of reverse convertible offerings Rabobank Financial Products BV intends to price Oct. 25, were 11.5% callable knock-in reverse convertibles linked to Apple Computer, Inc.

The notes are due Oct. 30, 2007 and carry a knock-in level of 70% of the initial price.

Another tech-related note was a 10.7% note linked to Yahoo! Inc. That note is due Oct. 30, 2007.

The knock-in level is 80% of the initial price.

The bank also intends to price 11% callable knock-in reverse convertibles linked to Qualcomm. Those notes are due Oct. 30, 2007 and carry a knock-in level of 80% of the initial price.

Other tech-related notes announced Monday include reverse convertibles linked to SanDisk Corp. and Advanced Micro Devices, Inc.

The SanDisk notes carry a 14% coupon and are due April 30, 2007. The knock-in level is equal to 70% of the initial price.

The AMD notes have a 13.4% coupon and are due Oct. 30, 2007. The knock-in level is 65% of the initial price.

Payout for both the ScanDisk and AMD notes are the same as the Apple- and Yahoo!-linked notes.

Rabo's energy notes

Looking to the energy sector, Rabobank said it plans to price notes linked to Chesapeake Energy and Schlumberger Ltd.

In the Chesapeake offering, the callable knock-in reverse convertibles carry an 11.25% coupon and are due Oct. 30, 2007. Those notes are set to price Oct. 25.

The notes have a knock-in level equal to 80% of the initial price.

The issuer has the option to call the notes at par on each quarterly redemption date.

In the Schlumberger offering, the notes carry a 10.5% coupon, are due Oct. 30, 2007 and are set to price on Oct. 25. The trigger is 80%.

Another energy-related offering announced Monday by Rabo was 11.5% reverse convertibles linked to Ensco International Inc. Those notes are also due Oct. 30, 2007 and carry a knock-in level of 70% of the initial price.

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