JPMorgan Chase prices $3 million notes linked to basket of commodities-related indexes

By Sheri Kasprzak

New York, Aug. 21 - Heading up structured products news Tuesday was an offering of $3 million in principal-protected notes linked to a basket of commodities indexes from JPMorgan Chase & Co.

In other news, more reverse convertibles offerings were put on the table Tuesday. HSBC USA, Inc. announced the pricing terms on $750,000 in 40.75% in reverse convertibles linked to InterOil Corp.

"It's a very well-diversified basket," said one market insider of the JPMorgan commodities deal. "You've got metals, energy and agriculture so that works quite well. It's true that American investors are pretty new to commodities, probably over the past couple of years we've started getting into commodities."

Another insider pointed out that the structured products marketplace, thanks to these indexes, are one of the few places that investors can have access to the commodities market.

"It's almost impossible to invest in commodities outside of something like this," he noted.

Terms of the notes

The notes are linked to 25% weighting of the S&P GSCI Agriculture Index Excess Return, 35% weighting of the S&P GSCI Energy Index Excess Return, 20% weighting of the S&P GSCI Industrial Metals Index Excess Return, 10% weighting of the S&P GSCI Livestock Index Excess Return and 10% weighting of the S&P GSCI Precious Metals Index Excess Return.

The three-year notes pay par plus an additional amount equal to the principal amount times the basket return times the 120% participation rate. The additional amount may be zero.

Index data

The S&P GSCI Agriculture Index Excess Return ended at 65.8872 on Monday. The Energy Index Excess Return closed at 398.3144 on Monday and the Industrial Metals Index Excess Return settled at 296.4584.

The Livestock Index Excess Return ended at 374.4175 on Monday and the Precious Metals Index Excess Return closed at 104.6783.

HSBC's reverse convertibles

Elsewhere, HSBC announced the terms of $750,000 in 40.75% notes linked to InterOil.

The three-month notes pay par at maturity unless the stock falls below the $22.02 barrier price during the life of the notes and ends below the initial share price. The initial share price is $36.70.

ABN Amro Bank NV also priced notes linked to InterOil recently. Its offering was for a principal amount of $600,000 and had a 45% coupon.

The notes also pay par at maturity unless the stock falls below the barrier price during the life of the notes and end below the initial share price.

So far this month, InterOil's stock has traded between $24.00 on Aug. 1 and $40.75 on Aug. 13. On Tuesday, the stock fell by 95 cents, or 2.59%, to close at $35.75.

Another Citigroup-linked note

In other ABN Amro news, the investment bank announced plans to price an offering of 10% reverse convertibles linked to Citigroup, Inc.

The notes have a one-year term and pay par at maturity unless the stock falls below the 80% knock-in level during the life of the notes and ends below the initial share price.

The news comes after Barclays Bank plc said it was planning to price 12.75% in notes linked to Citigroup. The six-month notes pay par at maturity unless the stock falls below the 85% knock-in level during the life of the notes and ends below the initial share price.

Citigroup's stock traded between $49.49 on Aug. 8 and $48.81 on Aug. 17. The stock ranged between $46.57 on July 31 and $52.84 on July 12.

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