Citigroup raises $114.6 million; ABN Amro prices 40% reverse convertible

By Kenneth Lim

Boston, March 27 - Citigroup Funding Inc. led the structured products market on Tuesday with a massive $114.6 million offering of 9.25% one-year equity linked securities tied to the common stock of Intel Corp.

Meanwhile, ABN Amro Bank NV priced $1 million of three-month Knock-in Reverse Exchangeable Securities to bear a 40% annualized coupon.

Structured demand seen healthy

Citigroup priced $114.6 million of 9.25% one-year equity linked securities (ELKS) due April 4, 2008 linked to Intel's common stock on Tuesday, prompting remarks that the demand for structured products appears to remain robust.

"Offerings above $50 million aren't as big as they used to be," a structured products distributor said. "We've seen a number of large deals over the past year, especially in index-linked products or those linked to bellwether stocks. I think this is a sign that demand for structured products has been growing and continues to be high."

Santa Clara, Calif.-based Intel is the world's largest semiconductor chipmaker.

The Citigroup deal pays par of $10 at maturity unless Intel's share price closes at or below 80% of the initial share price, or $15.42, during the life of the ELKS. In that case, the payout will be 0.51894 shares of Intel or cash. Shares of Intel stock (Nasdaq: INTC) closed at $19.06 on Tuesday.

Citigroup also priced $73.49 million of 8.5% ELKS linked to Chesapeake Energy Corp. due April 4, 2008 on Tuesday. Those securities pay par of $10 upon maturity unless Intel's share price closes at or below 80% of the initial share price, or $24.61, during the life of the ELKS. In that case, the payout will be 0.32510 shares of Chesapeake or cash. Chesapeake stock (NYSE: CHK) ended at $31.08 on Tuesday.

Chesapeake is an Oklahoma City-based oil and gas exploration and production company.

ABN Amro deal bears 40% coupon

ABN Amro's newly priced $1 million offering of Knock-in Reverse Exchangeable Securities due June 29, 2007 linked to the common stock of Friedman, Billings, Ramsey Group Inc. will pay a coupon of 40% annualized.

"This was probably designed for some investors trying to take positions now that there's a lot of interest and concern about subprime lenders," a distributor said.

The exchangeables will pay par at maturity unless Friedman, Billings, Ramsey stock falls below the knock-in price of $4.41, or 75% of the initial share price, during the life of the securities and finishes below the initial share price. In that case, the payout will be 170.068 shares of Friedman, Billings, Ramsey.

Friedman, Billings, Ramsey is an Arlington, Va.-based investment bank with also invests in mortgage-related assets.

Subprime mortgage lenders have come under pressure recently after significant losses at leaders in the segment such as New Century Financial Corp.

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