JPMorgan prices $6.9 million notes linked to homebuilding index; ABN Amro plans Rogers index notes

By Sheri Kasprzak

New York, Oct. 18 - Despite a shaky homebuilding market, JPMorgan Chase & Co. priced $6.9 million in return enhanced senior unsecured notes linked to the Standard & Poor's Composite 1500 Homebuilding index.

One market source asked about the notes and the index Wednesday said the long term of the notes may be their only asset.

"It may be two years before homebuilding finally gets its head back above the water," he said. "I'm not impressed by [the homebuilding sector]. There's no indication to me that there's any improvement in market conditions and I don't think there will be any improvement in the foreseeable future."

Different views on builders

This market source's comments on the homebuilding sector contradicted the predictions of another market source asked about the future of homebuilding earlier this month. That source said he felt the market was turning around and could be much improved within a year.

The 0% notes linked to the S&P homebuilding index pay par plus triple any positive return on the index up to a maximum payout of 36.75%. The investors will share in any losses on the index. The notes are due April 23, 2008.

More deals in sector

Interestingly, JPMorgan intends to price bearish reverse exchangeable notes linked to a basket of homebuilding companies including Centex Corp.; D.R. Horton, Inc.; Lennar Corp. and Pulte Homes, Inc. on Oct. 24.

At maturity, investors will receive par in cash unless the final price of any of the stocks is greater than its initial level and it has closed at or above 150% of the initial level at any time during the life of the notes. If the trigger is hit and any of the stocks close above the initial level, investors will receive par minus the gain on the best performing stock, with a floor of zero.

Citigroup Funding, Inc. also plans to price notes that are banking against the sector. The investment bank will price on Oct. 24 equity linked securities connected to the stock of Toll Brothers Inc. Those notes pay, for each $10.00 in ELKS, a number of shares equal to par divided by the initial share price if the trading price up to the valuation date declines by 22.5% or more. Otherwise, payout will be par.

Barclays Bank plc also is gearing up to price a homebuilder-linked offering.

That bank plans to price 16.5% reverse convertibles linked to KB Homes. Those notes, set to price Oct. 27, are due April 30, 2007.

ABN Amro commodity-linked notes

In other structured products news, ABN Amro Bank NV announced its plans to price four-year partially principal-protected notes linked to the Rogers International Commodity index - Agriculture Excess Return.

The notes have an 80% protection level and are expected to price Oct. 26.

Other commodity offerings

ABN Amro has announced its plans earlier this month to price other notes linked to the Rogers index. Those 0% index out-performance return notes are expected to price on Oct. 26

The notes are due Oct. 30, 2009.

The investment bank priced $1.8 million in IONs linked to the Rogers index on Oct. 9.

Also selling recently in the commodity sector, on Oct. 10, Barclays priced $6 million in 0% protected notes linked to a basket of commodities that includes Brent crude, zinc, nickel and aluminum and in September, Barclays priced $1 million in notes linked to the Dow Jones - AIG commodities index. Those 0% notes pay triple any gain on the index capped at 30%.

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