Energy deals top activity; Rabo, Royal Bank of Canada plan Peabody-linked reverse convertibles

By Sheri Kasprzak

New York, Jan. 17 - A slate of energy-related offerings led structured products news Wednesday as market sources pointed to sagging oil prices as the culprit for a rush of reverse convertibles.

"Have you taken a look at oil prices lately?" asked one equity structurer. "Oil companies are taking a serious hit and that makes them prime candidates for [reverse convertibles]."

Another market source said that explanation makes sense to him as well.

"Oil had been sliding for some time now but it's gotten to the point now that the [oil] stocks are settling into a range," he said. "You don't want to [do a reverse convertible] when prices are sliding too much or gaining too much. Now seems to be ideal."

Even so, oil prices rebounded Wednesday, gaining $1.03 to close at $52.24 per barrel.

Peabody stands out

Although active in coal rather than oil, one of the energy names that keeps popping up in reverse convertibles is Peabody Energy Corp. On Wednesday alone, Rabo Financial Products BV and Royal Bank of Canada announced reverse convertibles linked to the company.

In Rabo's deal, which is being conducted through LaSalle Financial Products, Inc., the 12.1% reverse convertibles are due in one year and have a 75% knock-in level.

Those notes are primed to price on Jan. 26.

RBC priced $1.37 million in 13.5% notes linked to Peabody Friday. The six-month notes also have a 75% protection price.

Peabody's stock gained 4 cents on Wednesday to settle at $39.30 (NYSE: BTU).

According to LaSalle, Peabody's stock has fallen more than 16% since Dec. 5, 2006 and is off 45% since May 2006.

Other Peabody deals

Earlier this month, Calyon, Barclays Bank plc and JPMorgan Chase & Co. announced plans for new deals linked to Peabody.

Calyon intends to price 14.25% reverse convertibles linked to the stock through JVB Financial Group, LLC on Jan. 26.

Barclays priced $2.5 million in 14% reverse convertibles on Jan. 8. Those six-month notes carry a 75% protection price.

JPMorgan's 11.45% reverse convertibles are set to price Jan. 26.

Other oil offerings

In other energy-related deals, Barclays said Wednesday it plans to price 18% reverse convertibles linked to Southwestern Energy Co.

Those six-month notes are slated to price Jan. 19 and carry an 80% protection level.

Next week ABN Amro NV intends to set terms on 8.8% knock-in reverse convertibles linked to Chevron Corp. Those notes, due in a year, carry a 90% knock-in level and are set to price Jan. 24.

Rabo also has plans to price 9.25% knock-in reverse convertibles linked to ConocoPhillips.

The ConocoPhillips notes are due in one year and have a 90% knock-in level.

Southwestern's stock is off 16% since Dec. 1, 2006 and ConocoPhillips' stock is down 14% since Dec. 5, 2006, according to a LaSalle release. Chevron's stock, LaSalle said, is off 8% since Dec. 14, 2006.

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