Barclays prices $2.5 million reverse convertibles linked to Western Union; HSBC to price JetBlue note

By Sheri Kasprzak

New York, Feb. 23 - Barclays Bank plc led structured products news to round out the week, pricing a slightly unusual structure of reverse convertibles linked to The Western Union Co.

The $2.5 million in 12.85% notes pay par in cash if Western Union's stock stays at or above the initial price during the life of the notes. Otherwise, payout will be in Western Union shares equal to $1,000 divided by the initial share price. There is no trigger.

"There's not cut-and-dried way to price these things," said one equity structurer when asked about the slight difference in the Western Union notes compared to a standard reverse convertible structure. "There's a lot of room to put things the way your client wants them."

HSBC to price JetBlue-linked note

Elsewhere in structured products Friday, HSBC USA Inc. said it intends to price 13.5% reverse convertibles linked to JetBlue Airways Corp.

It's the week's second reverse convertible note linked to the airline.

One market source contacted late Friday said he feels there's a lot of "hype" around the JetBlue name right now.

"This is bound to fizzle out pretty quickly," he said, referring to the fact that a few reverse convertibles have been linked to the name this week.

"It's all connected to news. It's all about the buzz and, sure, that attracts investors to a degree but it's all very short term and eventually investors will turn their attention to something else."

Terms of the deal

The seven-month notes pay par at maturity unless the final price of JetBlue's stock is lower than the initial price and the stock falls below the barrier price - 70% - during the life of the notes. If both occur, the investors will receive a number of shares equal to the principal divided by the initial price of the stock.

Earlier this week, Barclays Bank plc priced $3.25 million in reverse convertibles linked to JetBlue after the company announced it expects to post an operating loss for the first quarter following delays caused by a snowstorm in the New York metro area.

The airline announced that it expects a first-quarter operating margin of negative 4% to negative 2%. The company had originally expected an operating margin of 2% to 4%.

JetBlue has been plagued with problems after the snowstorm almost crippled the airline. The company is currently trying to win back its passengers by offering vouchers.

Barclays 19.85% notes pay par at maturity unless the final price is lower than the initial price and the share price is below the 75% protection level. In that case, the investors will receive a cash amount equal to par reduced by the percentage decrease in the price of the stock or a number of shares, to be paid in cash, equal to the fractional share multiplied by the final price.

Also in February, ABN Amro Bank NV announced plans to price 22.5% knock-in reverse exchangeables linked to the stock. Those notes have an 80% knock-in level.

On Friday, JetBlue's stock slipped 8 cents to close at $13.08 and lost another 8 cents after-hours trading (Nasdaq: JBLU).

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