UBS prices $13.1 million in health care versus consumer spending notes

By Sheri Kasprzak

New York, Oct. 27 - Heading up structured products news Friday was a $13.1 million offering of notes priced by UBS AG.

The payout at maturity is linked to the relative performance of the S&P 500 Health Care index versus the S&P 500 Consumer Discretionary index, with the health care index as the long index and the consumer discretionary index as the short index.

If the health care index beats the consumer discretionary index, investors will receive par plus 144% of the outperformance at maturity. If the health care index lags, the payout is par minus the underperformance.

The notes mature April 30, 2008.

UBS's S&P-linked securities

Elsewhere at UBS, the company said it plans to sell enhanced appreciation securities linked to the S&P 500.

One market source said Friday that the S&P 500 has been a popular index to link structured products to recently because it has reached record levels.

"There's really nothing bad to say about it [the S&P 500 index]," said the market source.

"From everything that's out there now, we are fully expecting the S&P to continue to make gains, so it makes it ideal for structured products."

The securities, due Jan. 31, 2008, pay triple the gain on the index up to a maximum gain of between 11% and 12.25% to be determined at pricing. The investors will be exposed to any losses on the index.

Earlier this week, Bank of America priced $6.5 million in Steepls senior notes linked to the S&P. The 0% notes are due Oct. 27, 2008.

Also, JPMorgan Chase & Co. plans to price 0% buffered return enhanced notes linked the index. Those notes are due April 9, 2008. Morgan Stanley intends to price 0% Performance Leveraged Upside Securities linked to the S&P 500. The notes are due Nov. 30, 2007.

Citi's trust certificates

In other structured products news, Citigroup Funding Inc. is gearing up to price 0% principal-protected trust certificates linked to the Dow Jones Industrial Average and the Nikkei 225.

One market source when contacted about the deal Friday said the appeal is the limited downside exposure.

"I haven't seen it [the offering], but I can tell you just in broad terms that it's probably a pretty safe investment," he said. "You don't see this structure very often, so it's a bit rare. The appeal is probably in that you're mostly just getting the upside of those indexes."

Representatives from Citigroup declined to comment on the certificates Friday.

The trust preferred securities mature in between 3.5 and 3.65 years - the date to be set at pricing - and holders will not receive less than par at maturity. If the index return amount is positive, investors may receive a supplemental distribution.

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