Earnings season could impact reverse convertibles; Credit Suisse to price revertibles linked to seven stocks

By Sheri Kasprzak

New York, Oct. 16 - With earnings season in full force, one equity structurer said Monday that earnings could impact the stocks linked to some reverse convertible offerings.

"It has an impact as much as anything else that throws the stock off," he noted.

"That's not to say that other things wouldn't be equally important. You could say the same thing about any news within the company, any talk of mergers or buyouts, any number of things could make a particular company a good reference stock [for reverse convertibles]."

On Oct. 11, ABN Amro Bank NV announced its plans to price 8% reverse exchangeables linked to General Electric Co. Only a few days later, on Friday, GE announced its third-quarter earnings. The company reported net revenues of $5.1 billion, compared to $4.6 billion for the corresponding quarter of 2005. The stock subsequently dropped Friday by 24 cents to $35.80. On Monday, the stock dropped again by 42 cents to end at $35.56 (Nasdaq: GE).

The notes announced Oct. 11 are set to price on Oct. 26, have a 90% knock-in price and are due April 30, 2007.

GE linked to June offering

General Electric has not been linked to very many reverse convertible offerings recently.

In June, ABN Amro priced $2.8 million in 8.5% reverse exchangeables linked to GE. Those exchangeables carried a 90% knock-in level.

Credit Suisse's new offering

In other structured products news, Credit Suisse (USA), Inc., via Fixed Income Securities, will price reverse convertibles - or Revertibles, as the bank calls them - linked to seven stocks.

The 14.5% notes are linked to the stocks of NutriSystem Inc., Nasdaq Stock Market Inc., Hansen Natural Corp., eBay Inc., Bill Barrett Corp., Gold Fields Ltd. and Eagle Materials Inc.

The notes carry a 70% knock-in level.

Stocks are familiar faces

The stocks linked to the offering announced Monday have popped up before for Credit Suisse, but in separate, individually-linked deals.

The investment bank announced earlier this month that it intended to price 18.25% reverse convertibles linked to Nasdaq Stock Market, 12.25% reverse convertibles linked to Gold Fields, 18.75% revertibles linked to Hansen, 19.5% notes linked to NutriSystem, 16.15% notes linked to eBay, 11.15% notes linked to Bill Barrett and 14.5% notes linked to Eagle Materials.

All of those notes were set to price on Oct. 26 and all were being sold through Fixed Income Securities.

Valero gains popularity

In other reverse convertibles news, Valero Energy Corp. has turned up as a linked stock to several offerings announced recently.

In August, the energy company's stock was trading between $58.53 and $67.45. For September, the stock traded in a range from $48.15 to $57.77 and so far this October, the stock has traded between $48.17 and $53.59. On Monday, the stock gained 13 cents to close at $53.72 (NYSE: VLO).

The company was linked most recently to 10% to 11% notes to be priced by Credit Suisse.

The notes are due Oct. 31, 2007.

Barclays, Rabo also plan notes

Earlier this month, Barclays Bank plc priced $2 million in 14.85% reverse convertibles linked to Valero. Those notes carry an 80% protection price. Barclays also priced $10 million in 10% reverse convertibles, also earlier this month, linked to Valero. Those notes carry a 70% protection price and are due Oct. 12, 2007.

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.

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