Terms emerge on SocGen's slate of reverse convertibles; Lehman to price S&P 500 annual review notes

By Sheri Kasprzak

New York, Dec. 14 - Details emerged on the latest crop of reverse convertible offerings from Societe Generale, New York Branch, led by a 10.25% offering linked to Archer-Daniels-Midland Co.

The investment bank also priced notes linked to Yahoo! Inc., United States Steel Corp., and SanDisk Corp.

A market source said Thursday that reverse convertibles are likely here to stay and will continue to be strong into the New Year.

"Investors want them, there's a big demand for them and they'll continue to make up [structured products] for the most part in the next year," he said.

As to the sectors that will be chosen as reference stocks for those offerings, the area gets a bit grayer.

"It has little to do with the sector," said the market source, a New York-based equity structurer. "It has more to do with stock volatility.

"There will be times when some sector or another is more volatile and so you'll probably see more [reverse convertibles] in technology, for example."

SocGen's tech deals

Still, some of the offerings announced by Societe Generale - which all priced at the end of November - are linked to technology companies.

The company sold $2.25 million in 12.1% notes linked to Yahoo! Inc. The six-month notes have an 80% knock-in level.

SocGen also priced $3.75 million in 15.25% notes linked to SanDisk. Those one-year notes have a 70% knock-in level.

Similar offerings have popped up recently.

ABN Amro Bank NV is gearing up to price 13% Reverse Exchangeables linked to Yahoo! Inc. The notes are set to price Dec. 26.

In October, Barclays Bank plc priced $950,000 in 11.3% in notes linked to the stock as well.

In November, ABN Amro priced $1.475 million in 16% Reverse Exchangeables linked to SanDisk and Societe Generale priced a $1 million in 16.75% RevCons linked to SanDisk.

ADM-linked notes

SocGen also priced $6 million in 10.25% in RevCons linked to Archer-Daniels-Midland Co.

The one-year notes have an 80% initial knock-in level.

Earlier this month, Barclays priced $4 million in reverse convertibles linked to ADM. Those notes have a 10% coupon and are due in one year.

Also, earlier this month, HSBC USA Inc. announced its plans to price, on Dec. 21, 9.5% notes linked to ADM.

Lehman's S&P-linked notes

Elsewhere in structured products, Lehman Brothers Holdings Inc. said it plans to price buffered annual review notes linked to the S&P 500 index.

The three-year notes pay par plus a call premium based upon three review dates. The investors receive par plus 6.75% to 7.25% if called on the first review date, par plus 13.5% to 14.5% if called on the second review date and par plus 20.25% to 21.75% if called on the final review date. The actual percentages will be determined at pricing, which is scheduled for Dec. 26.

If the notes are not automatically called, the principal is protected up to a 10% decline in the index. The investors will lose 1.1111% of their investment for every 1% below the 10% protection level the index declines at maturity.

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