Merrill prices $12.72 million in FTSE 100-linked notes; RBC sells notes linked to Amex Airline index

By Sheri Kasprzak

New York, May 30 - Merrill Lynch & Co., Inc. led structured products news in the short week with $12.715 million in return enhanced notes linked to the FTSE 100 index.

Elsewhere, Royal Bank of Canada got into the action with $1.075 million in enhanced return leveraged notes linked to the Amex Airline index. RBC also priced $6.582 million in reverse convertibles linked to General Motors Corp., a stock that has been relatively popular for reverse convertibles of late.

FTSE 100 a popular index

The FTSE 100 continues to gain in popularity in the structured products marketplace as the index continues to make gains.

"As long as there's a possibility that investors will make money from a note linked to the index, it will remain popular," said one market source when asked about the reasons the FTSE 100 is so prevalent now. "The index has been making steady gains historically so that makes it something worth looking at."

In fact, in May, the index jumped to over 6,600 after trading around 6,500 in April. In March, the index gained 2.4% and for the first three months of the year, the index gained 2%.

Deal terms

Under the terms of the 16-month FTSE 100-linked notes, which are being sold through J.P. Morgan Securities Inc., investors will receive par times double the index return, capped at 15.1%, if the final index level is greater than the initial index level.

The notes have a 10% buffer and investors will lose 1.1111% of their investment for every 1% drop in the index beyond 10%.

Similar deals

Earlier this month, Barclays Bank plc priced $13.3 million in buffered return enhanced notes linked to the FTSE 100.

Those notes have a 16-month term and pay par times double the index, capped at 15%.

The notes also have a 10% buffer and investors will lose 1.1111% for every 1% beyond 10% the index drops.

Amex Airline notes

In other structured products news, Royal Bank of Canada priced $1.075 million in enhanced return leveraged notes linked to the Amex Airline index.

The zero-coupon notes pay par times double the ending index level, capped at a maximum redemption amount equal to par times 118%, if the final index level is greater than the initial level.

If the final index level is less than the initial level, investors will participate in any losses.

The index tracks the stock performance of most major domestic and international airlines.

Index components

The index includes Expressjet Holdings, Airtran Holdings, Continental Airlines, Frontier Airlines, Amr Corp., JetBlue Airways, Skywest Inc., UAL Corp., Southwest Airlines, Mesa Air Corp. and Alaska Air.

On Wednesday, the index gained 0.19 to close at 52.38.

GM-linked notes

Elsewhere at RBC, the bank priced $6.582 million in reverse convertibles linked to General Motors.

The notes have a six-month term and a 15.25% coupon.

The notes pay par at maturity unless the stock falls below the $21.34 barrier price during the life of the notes and ends below the $30.49 initial share price.

The offering is one of several GM-linked deals priced recently.

On Tuesday, Barclays announced the pricing of $4 million 13.25%, one-year notes linked to the stock and the pricing of $3 million in 17% notes linked to GM.

The $4 million notes have a 70% knock-in level and the $3 million notes have an 80% knock-in level.

Both notes pay par at maturity unless the stock falls below the knock-in level during the life of the notes and ends below the $30.47 closing stock price.

GM's stock has had its share of ups and downs this month, trading between $28.49 on May 10 and $31.97 on May 15.

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