Rabo to price two reverse convertibles; Lehman prices $3 million Wedding Cake notes linked to oil

By Sheri Kasprzak

New York, Nov. 20 - Heading up light structured products activity Monday were two reverse convertibles from Rabobank Financial Products BV with what one market source described as substantial coupons.

In the broader market, sources said pricing activity will likely remain slow this week ahead of the Thanksgiving holiday.

"We're probably going to have a few things here and there, but with people being away for the holiday and traveling and all this stuff, it'll probably be quieter than usual; that's probably the best way to put it," said a market source based in New York.

In terms of what will likely be pricing, the market source said: "Reverse convertibles show up a lot, but that's really no surprise."

Rabo's two notes

And speaking of reverse convertibles, Rabo announced Monday that it plans to price two notes with large coupons.

One of the notes is a 13% reverse convertible linked to Whole Foods Market, Inc. That seven-month note carries an 80% barrier.

Also, the company will price 17% reverse convertibles linked to Marvell Technology Group, Ltd. The four-month Marvell notes also have an 80% barrier and both notes are set to price Dec. 1.

Both notes are being offered through LaSalle Financial Products.

"Those are pretty nice-sized coupons," said one market source when asked about the relative size of the coupons Monday.

The equity structurer noted that because stock volatility determines the size of the coupon, these reference stocks "must be rather volatile."

Throughout October, Whole Foods' stock traded between $58.64 and $65.15 and so far this month, the stock has traded between $45.56 and $63.16.

On Monday, the stock gave up 25 cents to end at $49.15 (Nasdaq: WFMI).

Marvell's stock has traded between $16.41 and $19.09 in October and so far in November, the stock traded between $17.86 and $19.73. On Monday, the stock gained 9.5%, or $1.81, to close at $20.86 (Nasdaq: MRVL).

Whole Foods linked before

Whole Foods Market has been a reference stock to reverse convertible offerings quite frequently this past month.

On Nov. 17, Barclays Bank plc said it intends to price 9.5% reverse convertibles linked to the grocer.

Barclays also priced $3 million in 12.55% notes based on the stock on Nov. 16 and $1.2 million in 13.75% notes on Nov. 13. On Nov. 9, Barclays priced $1.25 million in 15.25% notes and a day earlier, the investment bank priced $1 million in 15.1% notes.

ABN Amro Bank NV is also gearing up to price 10.5% knock-in reverse exchangeables linked to Whole Foods on Nov. 27.

That bank also priced $550,000 in 10.25% reverse exchangeables linked to Marvell Technology in October 2004.

Lehman prices oil notes

Lehman Brothers Holdings Inc.'s crude oil-linked notes were the big buzz last week and to kick off this week, the investment bank priced its previously announced 100% principal-protected Wedding Cake notes linked to light sweet crude for $3 million.

The notes pay par plus 18% if, during the life of the notes, crude oil remains within the narrowest barrier range; par plus 11% if crude oil remains within a middle barrier range; and 5% plus if oil remains within the broadest barrier range.

Last week, Lehman priced $1.37 million in single-barrier synthetic reverse convertibles linked to light sweet crude. Those one-year notes pay par plus 9.05% at maturity. If crude oil prices fall below the barrier during the life of the notes and finishes below the initial price, a percentage equal to the final decline will be subtracted from the payout.

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