Barclays prices $41.775 million in notes linked to Asian index basket

By Sheri Kasprzak

New York, July 23 - Barclays Bank plc led structured products news to start off the week, pricing a $41.775 million offering of buffered return-enhanced notes linked to five Asian indexes.

The basket is linked to the Kopsi 200 index with a 29.65% weighting, the FTSE/Xinhua China 25 index with a 25.22% weighting, to the MSCI Taiwan index with a 21.75% weighting, to the Amex Hong Kong 30 index with a 16.5% weighting and to the MSCI Singapore Free index with a 10.1% weighting.

"This is on the large side," said one market source when asked about investor interest in these particular indexes. "It's not that surprising though. Asian indexes, those in particular, are gaining in popularity."

The one-year notes pay double the appreciation of the basket up to a maximum return of 17%, assuming the final basket level is greater than the initial level.

The principal is protected up to a 10% drop in the basket. Investors will lose 1.1111% of their investment for every 1% decline in the basket beyond 10%.

Two similar deals

Back in May, JPMorgan Chase & Co. priced an $8.82 million offering of zero-coupon buffered return enhanced notes linked to the same five indexes. In that deal, the Amex Hong Kong 30 index had a 17% weight, the FTSE/Xinhua China 25 had a 21.5% weight, the Kopsi 200 had a 29% weight, the MSCI Taiwan index had a 22% weight and the MSCI Singapore index had a 10.5% weight.

Those notes have an 18-month term and also pay double any positive return on the basket, up to a 24.5% maximum return. The investors will lose 1.1111% for each 1% decline in the basket beyond 10%.

Credit Suisse, Nassau branch, priced a $3.05 million issue of zero-coupon Buffered Accelerated Return Equity Securities earlier this month, linked to four of the five indexes linked to the Barclays deal.

Those notes are linked to equal weights of the Kopsi 200, the MSCI Taiwan, the MSCI Singapore Free and the FTSE/Xinhua China 25 indexes.

The three-year notes pay par plus 120% of any basket gain. If the basket remains flat or declines by no more than 25%, payout will be par. Investors can expect to lose 1% for every 1% decline beyond 25%.

Lehman's commodities notes

Elsewhere in structured products news, Lehman Brothers Holdings, Inc. is negotiating the terms on an offering of zero-coupon buffered return enhanced notes linked to 10 commodities.

The notes are very similar to an offering of 10 commodities announced by Lehman last week.

The notes are linked to equal weights of Brent crude oil, No. 2 fuel heating oil, Grade A copper, primary nickel, special high-grade zinc, gold, No. 11 world sugar, coffee robusta, class III milk and lean hogs.

A market source said recently that the offerings make it clear that metals are not the only commodities investors are looking at and that agriculture is an area some may be looking at as well.

Another market source said Monday that commodities are fairly new in the U.S. structured products marketplace.

"This is an indication of two things," he said. "Investors are getting more comfortable with commodities and they're looking for diversification in these baskets [of commodities]. I think it's a great sign because it has taken us some time to move into commodities-linked notes."

If the final basket level is greater than the initial level, the notes pay par plus the principal amount times the basket return times an upside participation rate expected to be between 140% and 160% with the actual rate to be determined at pricing.

If the final basket level is less than the initial level but greater than the 80% buffer, the investors will receive par at maturity.

If the final basket level is below the buffer, investors will receive par plus the principal amount times the basket return times the protection percentage.

Other notes

Last week, Lehman announced plans to price principal-protected enhanced participation notes linked to equal weights of Brent crude oil, No. 2 heating oil, grade A copper, special high-grade zinc, primary nickel, gold, No. 11 world sugar, coffee robusta, class III milk and lean hogs as well.

Those notes have a three-year term and pay par plus any basket return times the upside participation rate, which is expected to be 110% to 140%.

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