Svensk, others announce oil-related offerings; Rabo, ABN Amro to price reverse convertibles

By Sheri Kasprzak

New York, Jan. 29 - AB Svensk Exportkredit and other investment banks loaded the structured products market with oil-related note offerings - a trend that may have a limited shelf life, according to market sources.

"Oil prices were starting to make a comeback last week," said one market source in New York when asked about the popularity of oil-related notes. "Looks like oil's dropping again."

That, he said, could mean oil will lose its appeal if prices continue to tumble.

"It's too early to tell right now," he noted.

Another equity structurer agreed.

"It all depends on where we go from here," he said. "If oil stabilizes, gets back to where it was last week, I think investors are interested. Otherwise, they're probably going to look elsewhere."

On Monday, oil prices dropped by $1.41 to end the session at $54.01. Prices had climbed as high as $55.96 earlier in the day. In the week prior, oil prices had been steadily making gains on colder winter weather in the northeast.

Svensk's offering

Looking to particular oil-related deals, Svensk Exportkredit priced $12.125 million in 0% triple-up notes linked to the Goldman Sachs WTI [West Texas Intermediate] Oil Enhanced - Excess Return Strategy. Goldman, Sachs & Co. is the distributor for the deal.

Payout at maturity for the one-year notes will be par plus triple any gain in the strategy level, capped at 39%. Investors will share in any declines.

Other oil notes

Elsewhere in the sector, JPMorgan Chase & Co. is working on an issue of 0% return enhanced notes linked to the PHLX Oil Services Sector index in early February.

The notes pay par plus double any positive return on the index up to a maximum return of at least 19%. Investors will share losses.

Also, Morgan Stanley intends to price 0% Performance Leveraged Upside Securities linked to the PHLX Oil Service Sector index in February.

Payout on those notes will be par plus triple any gains up to between $12.40 and $12.60 per $10.00 security, to be determined at pricing.

Lehman Brothers Holdings Inc. upsized to $1.78 million it offering of 0% single-barrier synthetic reverse convertibles linked to light sweet crude. The deal was priced at $1.58 million on Jan. 25.

Payout will be par plus a fixed return of 2.16%. If crude oil prices fall below the barrier price during the life of the note, payout will be par plus 2.16% minus the decline. The barrier price is $43.384, or 80% of the initial crude oil price.

Finally, Merrill Lynch & Co., Inc. will price later this week 10% knock-in notes linked to Oil Service HOLDRs.

Payout will be par in cash unless the Oil Services HOLDRs reach the knock-in level of 85% of the initial price during the life of the notes. If that is the case, payout will be a number of Oil Service HOLDRs equal to $1,000 divided by the initial price.

Rabo, ABN Amro plan reverse convertibles

Elsewhere in structured products news Monday, Rabo Financial Products BV and ABN Amro Bank NV announced imminent reverse convertibles with reasonably big coupons.

Rabo intends to price 19% reverse convertibles linked to JDS Uniphase Corp. and ABN Amro will price 15.75% notes linked to Nymex Holdings Inc.

The four-month Rabo notes pay par unless JDS's stock falls below the 80% knock-in level, in which case payout will be a number of shares equal to $1,000 divided by the initial share price.

The deal is slated to price Feb. 9.

The one-year Nymex-linked notes pay par at maturity unless Nymex's stock falls below the 80% knock-in level during the life of the notes. In this case, the notes will pay a number of shares equal to $1,000 divided by the initial share price.

The notes are being distributed through LaSalle Financial Services, Inc.

Bear Stearns to price offering

In other structured products news, Bear Stearns Cos. Inc. will price 0% notes linked to the outperformance of the Russell 1000 Growth Index relative to the Russell 1000 Value index.

The notes, set to price later this week, pay par plus 121% of the percentage by which the return on the Russell 1000 Growth index is greater than the return on the Russell 1000 Value index.

Investors can expect to receive at least par for their investment.

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