Credit Suisse's $58.49 million notes linked to Asian indexes drew largest bid last week

By Emma Trincal

New York, June 20 - Credit Suisse AG, Nassau Branch's $58.49 million issue of 0% buffered return enhanced notes due July 3, 2013 linked to a basket of Asian indexes was the top deal in size last week as investors stretched for alternatives to the uncertainty surrounding developed countries, sources said.

The distribution platform was also a key factor, they added.

The basket included the Hang Seng index with a 25% weight, the Korea Stock Price Index 200 with a 25% weight, the Hang Seng China Enterprises index with a 21% weight, the MSCI Taiwan index with a 20% weight and the MSCI Singapore Free index with a 9% weight, according to a 424B2 filing with the Securities and Exchange Commission.

The basket return equals the sum of the weighted component returns for the basket indexes.

The component return for each basket index will be the product of (a) its final level divided by its initial level multiplied by (b) the final spot rate of its related currency relative to the U.S. dollar divided by its initial spot rate. Each index's final level will be the average of its closing levels on the five trading days ending June 28, 2013.

If the basket return is positive, the payout at maturity will be par plus 200% of the basket return, subject to a maximum return of 18%. Investors will receive par if the basket return is between zero and negative 10% and will lose 1.1111% for every 1% that it is less than negative 10%.

Buy low

"I don't know if it's because Asia is near the bottom with China slowing down - people buy at the bottom if they're smart - or if it's because Europe is a mess and the U.S. is so uncertain a few months before the elections," an emerging markets analyst said.

"An Asian bet like that could be a third option to place your money, an alternative to the U.S. and the euro zone. But I'm not even totally confident that it's the case. Honestly, things are so murky right now; it's hard to have a conviction in any part of the world. I had strong views back a couple of months ago. Now I don't."

Structure

A market participant said that the structure itself is not unique.

"Honestly, it sounds OK, but I'm surprised that it sold as much as it did. Perhaps it was an institutional trade. The terms don't seem particularly compelling," the market participant said.

"The cap is pretty good for a one-year, I guess, if you compare it with the typical cap on the S&P 500 in the mid-teens for a one-year. So I guess you're picking up a little bit extra on the upside plus some downside protection on a diversified basket," he said.

The JPMorgan factor

The sales platform was also a factor.

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

An industry source said that this in itself is enough to explain the size of the deal.

"They're really selling the paper to a lot of people. Personally I hadn't seen Credit Suisse before," he said.

"Their internal distribution for the private bank, the asset management is so huge, that type of size doesn't surprise me.

"It's an all-Asia-focused deal, and if people are looking for that region, that's one way to get access to it."

JPMorgan sells notes issued in its own name in more than 77% of its deals, according to data compiled by Prospect News for a period comprised between Jan. 1 and May 31.

Deutsche Bank is the next most widely used issuer (12% of JPMorgan's deals), followed by Credit Suisse (7.5%), Barclays (1.5%) and UBS (1.28%).

The notes (Cusip: 22546TVD0) priced June 15.

The fees were 1%.

The related currencies were the Hong Kong dollar for the Hang Seng and Hang Seng China Enterprises, the Korean won for the Korea Stock Price 200, the Taiwan dollar for the MSCI Taiwan and the Singapore dollar for the MSCI Singapore Free.

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