Energy, tech companies underlie Barclays reverse convertibles; SanDisk, Valero linked to Bear notes

By Sheri Kasprzak

New York, Oct. 17 - With several companies gearing up to release third-quarter earnings reports, energy and technology companies remained at the forefront of reference stocks linked to reverse convertibles Tuesday.

One equity structurer Tuesday said earnings season does not seem to be putting a damper on new structured products offerings.

"There's no indication of that from where I'm sitting," he said.

"If anything, there seems to be more activity [in reverse convertible notes]. I don't think it will discourage investors from buying, so as long as there is a demand there will be [offerings]."

Bear, Barclays lead news

Bear Stearns Cos. Inc. and Barclays Bank plc led reverse convertibles news Tuesday with word that they will price offerings linked in many cases to a energy- and tech-related stocks. Some of those companies are gearing up to release their third-quarter earnings.

"It has a great deal more to do with volatility in these [sectors] than it really has to do with earnings season," said another market source when asked about the impact of earnings on these reverse convertibles.

"It [earnings] matters to a degree, just because it will affect the stock."

Energy, tech names

Among the many names that Barclays plans to use as the reference for notes are Newmont Mining Corp., Sunoco Inc., Devon Energy Corp., Alcoa Inc., Indymac Bancorp Inc., El Paso Corp., Adobe Systems Inc., and Applied Materials Inc. The Newmont notes bear interest at 10.5%, the Sunoco notes at 11%, Devon at 10%, Alcoa at 9.5%, Indymac at 10.5%, El Paso at 9.5%, Adobe at 9.75% and Applied at 9.5%. The Newmont, Applied, Devon, El Paso and Alcoa notes carry an 80% protection level and the Sunoco, Indymac and Adobe notes carry a 75% protection level.

All of the notes are due Oct. 31, 2007 and are set to price Oct. 31.

Devon Energy Corp. will release its third-quarter earnings on Nov. 1. Indymac releases its earnings statement on Nov. 2.

Aluminum producer Alcoa saw its earnings fall short of expectations last week.

Bear plans notes

Bear, Stearns Cos. Inc. said it plans to price reverse convertibles linked to the stocks of SanDisk Corp., Valero Energy Corp., JetBlue Airways Corp. and Dell Inc.

Two of the linked stocks from Bear Stearns will be releases their third-quarter earnings statements within the next two weeks.

SanDisk is expected to release its earnings report on Thursday. Analysts' forecasts on SanDisk's results has been at 48 cents per share.

Valero Energy will release its third-quarter earnings on Oct. 31.

Terms of the notes

The SanDisk notes bear interest at 16.75% annually and are due October 2007. The 12% Valero Energy notes are due October 2007 and the 17% JetBlue notes are due April 2007. The 12% Dell notes are due April 2007.

Valero and SanDisk have been linked to a variety of other offerings recently.

Earlier in October, Barclays priced $2 million in 14.85% reverse convertibles and $10 million in 10% reverse convertibles linked to Valero.

Back in September, Rabo Financial Products BV, through LaSalle Financial Services Inc. announced its plans to price 11.8% reverse convertibles linked to Valero due Oct. 1, 2007. In August, Barclays priced $12 million in 10% reverse convertibles linked to Valero.

Earlier this month, Barclays announced its plans to price 19% reverse convertibles linked to SanDisk and LaSalle Financial Services Inc. said it plans to price 14% reverse convertibles linked to SanDisk on behalf of Rabo. In August, JPMorgan Chase & Co. priced $266,000 in notes linked to SanDisk.

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