Goldman prices $100 million in notes linked to iShares Emerging Markets Index Fund

By Sheri Kasprzak

New York, May 3 - The Goldman Sachs Group, Inc. grabbed structured products headlines on Thursday with a sizable deal - $100 million in zero-coupon enhanced participation notes linked to iShares MSCI Emerging Markets Index Fund.

"It's a great way to gain access to markets you might otherwise not have access to," said one market source when asked about the fund. "It's well-diversified already so you don't have to worry about putting all of your investment in just one company or even one country."

The countries with the top percentage weight in the index - 5% or more - are located in India, Mexico, Brazil, South America, Russia, Taiwan, China and South Korea.

Performance of the index

The fund uses a sampling strategy to try to track the index.

The index includes companies from a wide variety of industries and a wide variety of emerging markets countries.

As of March, the top industries on the index were commerce and banking; oil, gas and consumable fuels; semiconductor equipment; metals and mining; wireless communications; and diversified telecommunications.

The companies accounting for the largest percentage of the portfolio as of March 31, were OAO Gazprom; Samsung Electronics Co., Ltd.; Posco; Taiwan Semiconductor Manufacturing Co.; Kookmin Bank; Siliconware Precision Industries Co.; Lukoil; Chunghwa Telecom Co., Ltd.; China Mobile Ltd.; and United Microelectronics Corp.

The net asset value of the index for May 1 was $121.64 and the 52-week high was $118.85. The 52-week low was $82.61.

Note terms

The one-year notes pay par plus double any percentage gain in the fund, subject to a 10.6% cap. If the fund declines by 10% or less, payout is par. Investors can expect to lose 1% for each 1% decline beyond 10%.

Reverse convertibles

Moving to reverse convertibles and reverse exchangeables, several offerings with large coupons were introduced on Thursday.

Fixed Income Securities, LP will distribute several of the offerings for ABN Amro Bank NV, among them 20% Reverse Exchangeable Securities linked to Parker Drilling Co. and 20% Reverse Exchangeable Securities linked to W.R. Grace & Co. The offerings also include 17.75% Reverse Exchangeable Securities linked to Visteon Corp.

The notes remain popular, one insider said, because investors are still hungry for yield.

"At the end of the day, people [who invest in reverse convertibles] want to make money," he said. "They're not interested in just getting their investment back at maturity."

All of the notes have an 80% knock-in level and pay par at maturity unless the stock falls below the 80% knock-in level and ends below the initial share price. In that case, the notes pay a number of shares equal to $1,000 divided by the initial share price.

Other offerings

Elsewhere, Barclays Bank plc announced plans to price 17% reverse convertibles linked to General Motors Corp. The notes have a six-month term and an 80% knock-in level.

The notes pay par maturity unless the stock falls below the knock-in level and closes below the initial share price, in which case the notes pay a number of shares equal to $1,000 divided by the initial share price.

GM was a particularly popular reference stock throughout April with ABN Amro, Eksportfinans ASA, JPMorgan Chase & Co. and Royal Bank of Canada all pricing offerings.

ABN Amro priced $5.4 million in 10.5% Reverse Exchangeables linked to GM and Eksportfinans, through Natixis Securities North America Inc., priced $340,000 in six-month 22% reverse convertibles.

JPMorgan priced $2.083 million in six-month, 18% notes and RBC priced $6.853 million in six-month 16.75% notes.

Barclays other deal

In another significant offering, Barclays announced plans to price 13.4% reverse convertibles linked to Coldwater Creek Inc. Those notes also have an 80% knock-in level.

Coldwater Creek was part of the 11% enhanced yield securities linked to the Claymore YieldStream 20 basket of stocks. Eksportfinans priced the $47 million in notes recently.

Both Barclays' Coldwater Creek-linked notes and its General Motors-linked notes are also being distributed by Fixed Income Securities.

Stock performance

In April, Parker Drilling's stock traded between $9.72 and $11.81. W.R. Grace's stock ranged between $27.07 and $29.92 and shares of Visteon traded between $8.75 and $10.08.

GM's stock traded between $30.83 and $32.45 in April.

In April, Coldwater Creek's stock traded between $20.50 and $22.53.

ABN Amro's earnings

In other news at ABN Amro, the investment bank announced its first-quarter earnings Thursday.

Among the highlights was word that structured products had a "very strong quarter."

"Emerging markets, base metals and structured products all had a very strong quarter market by significant growth," said a press release announcing the earnings report Thursday morning.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.