JPMorgan to price reverse exchangeables linked to least-performing Dow stock

By Sheri Kasprzak

New York, July 24 - JPMorgan Chase & Co. led structured products news Tuesday with word that it plans to price reverse exchangeable notes linked to the least-performing stock in the Dow Jones Industrial Average index.

The one-year notes will pay a coupon expected to be at least 29.5%. The exact coupon will be determined at pricing, which is set for Aug. 10.

The notes pay par unless any stock in the Dow Jones Industrial Average falls below the 70% protection price during the life of the notes. JPMorgan's own stock is excluded from the calculation.

Should the trigger be hit, the notes pay a number of shares equal to $1,000 divided by the initial share price of the least-performing stock. If the cash value of the physical delivery amount is greater than $1,000, investors will receive par in cash.

JPMorgan's other Dow-linked notes

Earlier this year, JPMorgan priced similar offerings with higher coupons.

In May, the investment bank priced $2.526 million in reverse exchangeables linked to the least-performing Dow stock with a 29.35% annualized coupon. Those six-month notes also pay par at maturity unless any stock in the Dow Jones Industrials, excluding JPMorgan's own stock, falls by more than 30% during the life of the notes. The notes will then pay a number of shares of the least-performing stock equal to $1,000 divided by the least-performing stock's initial share price or, at JPMorgan's option, the equivalent cash value.

JPMorgan priced a $1.564 million offering of 27.39% reverse exchangeables also linked to the least-performing stock in the Dow on June 27.

Those six-month notes also pay par at maturity unless the least-performing stock falls below the 70% protection price during the life of the notes and ends below the initial share price. Should that happen, the notes pay a number of shares of the least-performing stock equal to $1,000 divided by the initial share price.

Barclays' Countrywide-linked notes

Elsewhere, Barclays Bank plc announced plans to price reverse convertibles linked to Countrywide Financial Corp. The notes will have a 17.5% annualized coupon

A market source familiar with the offering said Tuesday that the coupon is higher than previous Countrywide-linked reverse convertibles because of increased volatility in that stock.

"The stock has gotten more and more volatile," said the source. "That's what's pushing the coupon."

In fact, on Tuesday, the stock sank by 10.45%, or $3.56, to close at $30.50. So far this July, the stock has ranged between $30.50 and $37.34.

In June, the stock traded between $36.30 and $39.34.

Note terms

The latest Barclays notes 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. If that should happen, the notes pay a number of shares equal to $1,000 divided by the initial share price at maturity.

The notes have a three-month term and are set to price Aug. 3.

Similar deals

Earlier this month, Barclays announced plans to price 14.25% reverse convertibles linked to Countrywide. Those notes have a six-month term and pay par unless the stock falls below the 80% knock-in price during the life of the notes and ends below the initial share price.

On July 2, Barclays announced plans to price 11.75% notes linked to Countrywide, with a one-year term and an 80% knock-in level.

On June 12, Barclays priced $1.5 million in notes linked to Countrywide with a 12.6% annualized coupon. Those notes have a six-month term and a 70% knock-in price.

Barclays is not the only investment bank with high-coupon offerings linked to Countrywide.

Earlier this month, Lehman Brothers Holdings Inc. priced $500,000 in 24.8% notes linked to the stock.

Those notes have a three-month term and pay par unless the stock falls below the 80% knock-in level during the life of the notes and ends below the $34.94 initial share price. The notes then pay a number of shares equal to $1,000 divided by the initial share price at maturity.

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