Credit Suisse prices $21.32 million infrastructure notes; Lehman prices BRIC plus Korea notes

By LLuvia Mares and Sheri Kasprzak

New York, Nov. 2 - Leading structured products news Friday, Credit Suisse, Nassau branch priced a $21.32 million issue of 0% Buffered Accelerated Return Equity Securities (Bares) due Nov. 6, 2012 linked to the CS/RT Emerging Infrastructure index powered by HOLT.

"Credit Suisse with the Holt index calculations, they put quite a bit of effort in generating custom indices along with the providers. I think it is good for structured products because it gives a wide diversity of underlyings," said Tim Mortimer, Future Value Consultants managing director.

If the final index level is at least the initial level, the payout at maturity will be par plus any gain on the index.

The payout will be par if the index level declines by up to 15%. Investors will lose 1% for each 1% that the index declines beyond 15%.

The index is comprised of 50 equally-weighted exchange-listed emerging infrastructure-related companies that are chosen according to a rules-based methodology for scoring stocks.

"It kind of gives it a hedge fund style strategy but it in a much more transparent fashion and much lower cost," said Mortimer. "That is structured products moving beyond a simple related product in terms of the profile, you have geared upside and one for one downside. So you've got slightly more upside potential than downside but no cap - it's quite nice."

Credit Suisse also priced a somewhat similar $32.28 million issue of 0% Accelerated Return Equity Securities (ARES) due Nov. 6, 2012 linked to the CS/RT Emerging Infrastructure Index powered by HOLT.

If the final index level is greater than the initial index level, the payout at maturity will be par plus 120% of the gain on the index. If the final index level is equal to the initial level, the payout will be par. Investors will be fully exposed to any decline in the index.

Lehman to price BRICK notes

In other news Friday, market sources said Asian currency-linked notes are gaining in popularity as interest rate reductions in the United States make them more appealing to investors here.

"Interest rate cuts [in the U.S.] are really sparking interest in emerging markets currencies so it's really no surprise to see more things linked to Asian currencies," said one market source on an FX desk in New York.

"I would expect to see some stuff linked to currencies like the [Malaysian] ringgit and possibly the [Korean] won."

Lehman Brothers Holdings Inc. announced Friday that it is planning to price an issue of FX basket-linked notes linked to a basket of equal weights of the Brazilian real, the Russian ruble, the Indian rupee, the Chinese renminbi and the South Korean won.

Of the notes, one market source said, "They're interesting. My guess is that the investor wanted something with the BRIC currencies but was also interested in South Korea. These notes, of course, can be customized. There's a lot of room for creativity."

If the basket return is greater than zero on the valuation date, the investor will receive a payment at maturity equal to the principal amount plus an additional amount equal to the principal amount multiplied by the product of the leverage, which is expected to be 250%, and the basket return.

If the basket return is less than or equal to zero, the investors will receive par at maturity.

The zero-coupon notes have a two-year term.

Also on Friday, Lehman said it will price an offering of principal-protected notes with enhanced participation linked to a basket of Asian currencies.

The 18-month notes are linked to equal weights of the Indonesian rupiah, the Indian rupee, the Malaysian ringgit and the Singapore dollar.

The notes pay par plus the additional amount, which is equal to the greater of zero and par times the basket return times the participation rate. The participation rate is expected to be 175%, but the exact rate will be determined at pricing.

JPMorgan to price bearish notes on EMC

In other news, JPMorgan Chase & Co. plans to price bearish return enhanced notes due Jan. 4, 2008 linked inversely to the common stock of EMC Corp.

"Four times the value of the maximum return of 14% in 14 months, that's a pretty hard coupon," said Tim Mortimer, Future Value Consultants managing director.

"That clearly means that the stock only has to go down by 3% to get the full return so it is kind of betting that it's going to go down a little bit. It's a bearish note, there are not too many bearish ones around, they tend to be double or triple geared which is a little bit higher and means that to achieve the maximum return the stock doesn't have to fall very much and it doesn't make the client jumpy."

If the final price of EMC stock falls from the initial share price, investors will receive four times the absolute value of the loss, capped at 14.15%.

If the final share price is greater than the initial price, investors will share in losses according to the gain.

The notes will price on Nov. 1 and settle on Nov. 6.

J.P. Morgan Securities Inc. will be the agent.

JPMorgan to price Baidu notes

In a similar but separate deal, JPMorgan Chase & Co. plans to price bearish return enhanced notes due Jan. 4, 2008 linked inversely to the American Depositary Shares representing the class A stock of Baidu.com, Inc.

"It's four times gearing with a much higher cap which presumably means the volatility is higher," said Mortimer about the Baidu deal.

"The two products are very much the same except for the cap levels - same return, same gearing, but Baidu.com must be strictly more volatile to permit the extra upside. Again you are only requiring the stock to fall by 5½% which isn't very much and then you get the return of 23% in just over a year, which is a pretty hard return."

If the final price of Baidu.com stock falls from the initial share price, investors will receive four times the absolute value of the loss, capped at 22.9%.

If the final share price is greater than the initial price, investors will share in losses according to the gain.

The notes will price on Nov. 2 and settle on Nov. 7.

J.P. Morgan Securities Inc. will be the agent.

UBS prices $23.81 million commodity notes

The commodity continues to be the more favored structured product by investors in the sector, according to Mortimer.

UBS AG priced a $23.81 million issue of 0% return optimization securities with contingent protection due April 30, 2009 linked to the UBS Bloomberg Constant Maturity Commodity Index Excess Return.

"Commodities have become steadily more popular and this index is something which I have seen before in quite a few items - an interesting index," Mortimer said. "UBS is the index sponsor and now they actually linked a product to themselves, no doubt a motivation for promoting the index."

If the final index level is at least the initial level, the payout at maturity will be par plus 300% of any gain on the index, capped at a payout equal to 127% of par. Otherwise, the payout will be par times the index performance.

UBS Financial Services Inc. and UBS Investment Bank will be the agents.

Goldman sells $17.06 million S&P notes

AB Svensk Exportkredit priced $17.06 million of 0% enhanced participation notes due Dec. 9, 2008 linked to the S&P 500 index via underwriter Goldman, Sachs & Co.

"In a way it's very similar to the commodity product that has a 300% return with a cap. It is linked to S&P, however the cap is rather lower and you are only going to get 18.9% maximum return in 13 month," Mortimer commented.

"These products with a year or year and a half maturity linked to the S&P are always very popular because they are quite a good risk return profile and for the tax treatment it is better than principal protected notes, that's why I think you see so many of them."

The payout at maturity will be par plus triple any index gain, subject to a maximum return of 18.9%. Investors will be fully exposed to any index decline.

Citigroup sells $40.94 million Stoxx notes

Citigroup Funding Inc. priced a $40.94 million issue of 0% Stock Market Upturn Notes due Feb. 6, 2009 linked to the Dow Jones Euro Stoxx 50 index.

"It has the triple upside and the return max is 20% so it's pretty similar to the S&P with a different underlying, similar terms and same motivation," Mortimer said.

"It does not require the market to go down very much and the tax treatment is quite good."

The payout at maturity will be par of $10 plus triple any index gain, subject to a maximum return of 20%. Investors will be fully exposed to any index decline.

The notes have been approved for listing on the American Stock Exchange under the symbol "SOG."

Citigroup Global Markets Inc. is the underwriter.

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