Merrill to price notes linked to FTSE 100 index; Wells Fargo plans notes linked to global index basket

By Sheri Kasprzak

New York, May 4 - Merrill Lynch & Co. announced plans Friday to price zero-coupon buffered return enhanced notes linked solely to the FTSE 100 index through J.P. Morgan Securities Inc.

The FTSE 100, an index that includes the upper echelon of British companies, has traditionally been part of a basket when it has appeared in structured products deals.

"It is rare," said one market insider when asked about seeing the index on its own. "Just looking at the index performance, there has been a pretty dramatic increase recently. That may have something to do with it."

In fact, the index is now trading at its highest level since September 2000, thanks in part to substantial gains at Rolls-Royce.

In March, the most recent month in which data is available, the index gained 2.4% after plummeting to 6,000 in mid-March. For the first three months of the year, the index gained 2%.

On Friday, the index climbed 65.90 to close out the week at 6,603.70.

Deal terms

The notes have a 15-month tenor and are set to price May 11.

Payout at maturity will be par plus double any gain on the index, subject to a maximum total return expected to be at least 14.3%. The maximum return will be determined at pricing.

If the index declines by 10% or less, investors will receive par at maturity.

Investors can expect to lose 1.1111% for ever 1% the index declines beyond 10%.

Stock performance

Looking to the performance of the top 10 stocks that comprise the index, almost all of the stocks saw an increase in April.

BP's stock ranged between 547.50p and 576.50p for the month of April. HSBC Holdings' stock traded between 886.50p and 928p for the month. GlaxoSmithKline's stock traded between 1,338p and 1,481p during April and Vodafone Group's stock traded between 136.60p and 143.50p. Royal Bank of Scotland's stock traded between 1,980p and 2,071p for April and Royal Dutch Shell's stock between 1,675p and 1,750p. Barclays' stock ranged between 723p and 756p for the month and AstraZeneca's stock ranged between 2,718p and 2,953p. Anglo American plc's stock traded between 2,672p and 2,780p.

FTSE basket appearances

While, the FTSE 100 has rarely been seen on its own in structured products, it has shown up as part of an index basket.

In March, the index was part of a few deals.

The Goldman Sachs Group Inc. priced $5 million in zero-coupon enhanced participation notes linked to a basket that included the FTSE 100, as well as the Dow Jones Euro Stoxx 50, Topix and Swiss Market indexes.

Also in March, Credit Suisse (USA), Inc. priced $46.514 million in zero-coupon Buffered Accelerated Return Equity Securities linked to, among other indexes, the FTSE 100. The basket also included the S&P 500, Russell 2000, Dow Jones Euro Stoxx 50, Nikkei 225 and S&P/ASX 200 indexes.

In February, Goldman priced $14.758 million in 0% leveraged notes linked to a basket that included the FTSE 100, the Dow Jones Euro Stoxx 50, the Topix and the Swiss Market indexes.

Wells Fargo plans notes

Looking to another note linked to a global index basket, Wells Fargo & Co. announced plans Friday to price zero-coupon enhanced participation securities linked to a global index basket that includes equal weights of the Dow Jones Euro Stoxx 50, the S&P 500 and the Nikkei 225 indexes.

The notes pay par at maturity if the final basket level is equal to or greater than the initial basket level.

The notes have an 80% knock-in level and if the level is breached, the investors will lose an equal percentage of the original amount of their notes at maturity.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.