Barclays prices reverse convertibles linked to Advanced Micro Devices, Alcoa

By Sheri Kasprzak

New York, Aug. 20 - Reverse convertibles are still incredibly popular and may continue to maintain that popularity, despite current market conditions.

On Monday, Barclays Bank plc disclosed pricing on two reverse convertibles with relatively high coupons.

"Reverse convertibles are a good way to make a profit from your investment, even if the stock market isn't as great as it could be," said one market insider. "With conditions as they are now, it's really no wonder that you're seeing so many."

Analyst Tim Mortimer said late last week that the appetite for reverse convertibles in the U.S. structured products marketplace has been big.

"The U.S. market has embraced reverse convertibles in a big way," Mortimer said in an interview Friday. "We don't know how far this correction is going to go with the subprime issue. In a few months' time, if the markets are as rocky, I wonder what the appetite will be for reverse convertibles."

Two from Barclays

One of the offerings from Barclays announced Monday was $2 million in 20% notes linked to Advanced Micro Devices, Inc.

The other was an offering of $2.5 million in 16.35% notes linked to Alcoa Inc.

Both notes have a two-year term and pay par plus the coupon at maturity unless the respective stock falls below the knock-in price during the life of the notes and ends below the initial share price.

The knock-in level for the Alcoa offering is 75% and for the AMD offering is 80%.

Assuming those two conditions are met, investors will receive a number of shares equal to $1,000 divided by the initial share price. The initial share price for AMD is $11.89 and the initial share price for Alcoa is $33.29.

Stock performance

Moving to the stock performance of the two reference stocks, AMD's stock has ranged between $11.64 on Aug. 16 and $13.42 on Aug. 8.

In July, the stock traded between $13.54 on July 31 and $15.84 on July 17.

Alcoa's stock has traded $31.92 on Aug. 16 and $37.95 on Aug. 1.

The stock ranged between $38.20 on July 31 and $47.35 on July 13.

Other reverse convertibles

Elsewhere, Barclays announced plans to price several other reverse convertibles, including an offering of 13.25% in notes linked to Home Depot, Inc. and 12.75% in notes linked to Citigroup Inc.

The two reverse convertibles have a six-month term.

The Home Depot notes pay par at maturity unless the stock falls below the 80% knock-in level during the life of the notes and ends below the initial share price. The notes then pay a number of shares equal to $1,000 divided by the initial share price.

The Citigroup-linked notes also pay par at maturity unless the stock falls below the 85% knock-in level during the life of the notes and ends below the initial share price. Under those circumstances, the notes pay a number of shares equal to $1,000 divided by the initial share price.

So far this month, shares of Home Depot have ranged between $32.82 on Aug. 16 and $37.80 on Aug. 8. In July, the stock traded between $36.75 on July 27 and $40.94 on July 12.

Citigroup's stock traded between $49.49 on Aug. 8 and $48.81 on Aug. 17. The stock ranged between $46.57 on July 31 and $52.84 on July 12.

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