Deutsche Bank brings $429.64 million of knock-out notes in second-largest offering of the year

By Sheri Kasprzak

New York, Sept. 19 -- The second-largest deal of the year priced this week. Deutsche Bank AG, London Branch priced $429.64 million of zero-coupon knock-out notes due March 19, 2014 linked to the Euro Stoxx 50 index, according to a 424B2 filing with the Securities and Exchange Commission.

A knock-out event occurs if the index level decreases by more than 20% on any day during the life of the notes.

If a knock-out event does not occur, the payout at maturity will be par plus the index return, subject to a contingent minimum return of 7.6%.

If a knock-out event occurs, the payout will be par plus the index return, with full exposure to any losses.

JPMorgan Chase Bank, NA and J.P. Morgan Securities LLC are the agents.

The offering is a sharp contrast to the recent trend of smaller deals.

"The flexibility of structured notes allows for customization," said Deryk Rhodes, vice president at Incapital.

"Investors can express a particular market view. The size of deals is coming down, in part, because of advances in technology and trading and risk models permit much smaller sizes."

Investors may take similar stances

Although customization is replacing large offerings like the Deutsche Bank deal, investors with similar views are certainly getting into the market as well, said Rhodes.

"For instance, if you're finding a lot of clients that have a range-bound view, rather than buying an underlying, it's more efficient by going through a structured product," he said.

Deal sizes have, for the most part, decreased because special notes are available, but that doesn't mean large groups of investors aren't still seeking a specific structure that appeals to them.

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