SG to price 27.6% Worst-of ReConvs linked to basket of auto stocks

By LLuvia Mares

New York, Sept. 10 - SG Structured Products, Inc. plans to price Worst-of ReConvs due March 28, 2008 linked to a basket of common stocks from the auto sector, according to a term sheet.

The six-month notes will pay 13.8% for an annualized rate of 27.6%. Interest will be payable quarterly.

"It's a short-term investment with a high coupon," said a market analyst about the structure. "If the market stays relatively steady, goes sideways or moves-up even a little bit, the investor gets a huge return."

The analyst said the significant return also off-sets some of the potential losses that can occur if one of the names in the baskets falls out.

"The coupon looks enormously appealing and the 6-month trade is helpful, there is a lot of uncertainty in the auto sector right now," the analyst said. "So anyone of those stock could possibility can drop 20% in an environment like this."

"So worst of strategies are hit or miss in this current market environment," he said. "Although the numbers look very attractive it's kind of a buyer beware situation."

The basket will include the common stocks of DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.

The payout at maturity will be par unless any stock falls by more than 20% during the life of the notes and the final share price for any stock is less than its initial share price, in which case the payout will be a number of shares of the worst-performing stock equal to $1,000 divided by that stock's initial share price.

In addition, the company will also price 23.2% Worst-of ReConvs linked to a basket of stocks drawn from the financial sector.

The six-month notes will pay 11.6% for an annualized rate of 23.2%. Interest will be payable quarterly.

The basket will include the common stocks of IntercontinentalExchange, Inc., Lehman Brothers Holdings Inc. and Moody's Corp.

The payout at maturity will be par unless any stock falls by more than 30% during the life of the notes and the final share price for any stock is less than its initial share price, in which case the payout will be a number of shares of the worst-performing stock equal to $1,000 divided by that stock's initial share price.

Both deals will price on Sept. 25 and settle on Sept. 28.

SG Americas Securities, LLC will be the principal agent, with Countrywide Securities Corp. as co-agent.

Barclays prices ETF Plus notes

Barclays Bank plc priced a $5 million issue of ETF Plus variable-coupon notes due Sept. 8, 2008 linked to the iShares MSCI Emerging Markets index fund, according to a 424B2 filing with the Securities and Exchange Commission.

"What we have here is a like an ETF but it has a variable-coupon that the ETF probably doesn't have. It's a note that is linked to iShares and MSCI Emerging Markets index fund but it pays a coupon," said Keith A. Styrcula, chairman of the Structured Products Association. "So what you have here is one of the first offerings of a structured product that takes an ETF and enhances it with coupon."

Interest will be equal to 2% plus any apportioned dividends, which will be the stated dividends per share of the ETF times the number of reference shares represented by each note. Each note will represent a number of shares equal to par divided by the initial share price.

"The ETF plus factor of this particular structure is, it gives you an additional coupon of 2%. A variable-coupon that will be between 1.5% and 2.25%," Styrcula said.

More to come?

Describing the deal as "unusual," he noted that "it's taking an ETF and creating these structured products.

"We haven't seen a lot of that yet for some reason but we have been expecting it to really take off in the market."

The payout at maturity will be par plus the share performance of the fund. Investors will share in any losses.

Barclays Capital Inc. is the agent.

"The structure appears to give a coupon that you wouldn't otherwise get by investing in the ETFs directly. In the future you are going to see a lot of structured notes around ETFs - they are kind of like an emerging investment class and as the volume builds in ETFs there are more acceptances," Styrcula said.

"There will be more variations on it in the structured products world. I am surprised it hasn't happened sooner. But leave it to Barclays to be kind of a first mover on that."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.