Merrill prices several large offerings; Lehman negotiates $2.5 million in BRIC-linked notes

By Sheri Kasprzak

New York, April 5 - To round out the short week in structured products ahead of Good Friday, Merrill Lynch & Co., Inc. announced terms on several substantial-sized deals.

Heading up the lot was a $129 million issue of zero-coupon Accelerated Return Bear Market Notes linked to Cohen & Steers Realty Majors Portfolio index.

The index, which seeks investment results corresponding to the price and yield performance of large real estate investment trusts, pays par plus triple the absolute value of the change, if the index decreases. The return is capped at $13.42 per $10.00 note.

Investors are fully exposed to loss in proportion to any increases in the index.

Merrill's other notes

Also on Thursday, Merrill released the terms on a $102.5 million issue of 0% Accelerated Return Notes linked to a basket of global equity indexes that includes equal weights of the S&P 500, Dow Jones Euro Stoxx 50 and Nikkei 225 indexes.

The 14-month notes pay par plus triple any index gains, capped at $11.845 per $10.00 in principal.

Investors are fully exposed to any index declines.

The investment bank also priced $68.5 million in principal-protected notes linked to the Indian rupee/dollar exchange rate.

The 14-month notes pay par plus 545.2% times the exchange rate, with a $11.6356 per $10.00 note cap. Investors can expect to receive at least par at maturity.

Lehman prices BRIC-linked notes

The rupee-linked note is one of two offerings in the market Thursday linked to a BRIC currency or basket.

Lehman Brothers Holdings Inc. priced a $2.5 million offering of notes linked to the BRIC basket.

The basket contains equal weights of the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi.

The one-year notes take a long position in the above currencies and a short position in the U.S. dollar.

If the basket value is greater than zero on the valuation date, the investors will receive par plus a return amount equal to the principal multiplied by the product of 235% and the appreciation of the basket value. If the value on the valuation date is less than or equal to zero, the investor will receive par at maturity.

Merrill's PHLX-linked notes

Adding an indication that all is still not well with the U.S. housing market, Merrill priced $95.7 million in 0% Accelerated Return Bear Market notes linked to the PHLX Housing Sector index.

"I think we've all sort of given up on the housing market improving, haven't we?" asked one equity structurer on Thursday afternoon. "Any investment is going to be in the downturn of the sector. I've heard the whispers here and there that things are getting better but I don't think there's substantial proof. If I were on the other side, I'd still put my money against it."

The one-year notes pay triple the absolute value of any decrease on the index, capped at $13.00 per $10.00 investment. The investors receive par if the index climbs by up to 10% and will share in any losses if the index gains beyond 10%.

HSBC plans clean energy notes

Elsewhere in the market Thursday, HSBC USA Inc. announced plans to price Clean Energy Enhanced Market Participation Notes linked to a basket of clean-energy companies.

The notes are linked to equal weights of Zoltek Cos., Inc.; General Electric Co.; SunPower Corp.; Suntech Power Holdings Co., Ltd.; Itron, Inc.; OM Group, Inc.; Pacific Ethanol, Inc.; and Verasun Energy Corp.

The notes, set to price April 24, pay par plus three times any gain on the index, capped at a 30% return. Investors are exposed to losses.

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