RBC to price notes linked to commodities; Barclays to price commodity-linked notes

By Sheri Kasprzak

New York, April 10 - Royal Bank of Canada's planned sale of principal protected notes linked to a basket of commodities is ideal for investors who are seeking exposure to natural resources, a market source told Prospect News Thursday.

"Obviously, this is not a basket that is as diversified as we have seen," he said.

"This is for an investor who is focused on a particular type of commodity, in this case natural resources. If you're really confident in these commodities, I'd say go for it, but it's not for everyone. I, personally, like to see these types of notes diversified a little more, maybe throw some agriculture in there."

The notes are linked to 30% weighting each of West Texas Intermediate light sweet crude, natural gas and copper and 5% weighting each of nickel and London platinum.

Notes have five-year term

The zero-coupon notes have a five-year term and are principal protected.

The notes pay par at maturity if the basket performance is unchanged or negative during the life of the notes. If the basket performance is positive, the investors receive the principal amount plus the basket performance times the 100% participation rate.

The offering is set to price April 30.

Barclays plans commodity-linked notes

In a similar deal, Barclays Bank plc announced plans Thursday to price principal protected zero-coupon notes linked to a basket of commodities.

The basket comprises equal weights of gas oil, RBOB gasoline, natural gas, heating oil and WTI crude oil.

Those five-year notes pay par plus the principal amount times the basket performance and the 100% participation rate, assuming the basket performance is 0% or greater. The notes pay par at maturity if the basket performance is less than 0%.

Barclays prices three Valero-linked notes

In other news Thursday, Barclays priced three offerings of reverse convertibles linked to the stock of Valero Energy Corp.

The bank priced $1 million in 18% notes with a 80% knock-in level, $1 million in 15.7% notes with a 75% knock-in level and $1 million in 12.8% notes with a 70% knock-in level.

The notes pay par at maturity unless the stock falls below the knock-in price during the life of the notes or ends below the initial share price. If that should happen, the investors receive a number of shares equal to $1,000 divided by the initial share price.

The notes have a six-month term.

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