Bear to price notes linked to ISE-CCM Homeland Security index; JPMorgan negotiates index-linked notes

By Sheri Kasprzak

New York, Nov. 13 - With homeland security everywhere in the news, The Bear Stearns Cos. Inc. announced its plans Monday to price notes linked to the ISE-CCM Homeland Security index later this month.

The ISE-CCM Homeland Security index includes companies that provide contract work to the U.S. Department of Homeland Security and law enforcement agencies for counter-terrorism, infrastructure protection and border security.

One market source not affiliated with the offering said he feels the notes may have some popularity just given the popularity of homeland security itself.

"It's a buzzword," he said. "Anything remotely connected to homeland security is automatically going to fly."

Sector is 'a hot item'

With regard to the recent elections, the market source noted that it probably didn't hurt.

"It's been on the forefront of everyone's mind," he said. "As an investment, it's going to be a hot item and it probably will remain so for quite some time."

Bear Stearns declined to comment.

The 18-month notes, which are set to close later in November, pay par plus 1.5 times the percent increase in the index, with a maximum return of 20% to 22%, to be determined at pricing.

The investors will have full exposure to any declines.

JPMorgan's single index notes

In other structured products news Monday, JPMorgan Chase & Co. announced its plans to price three separate notes linked to three separate indexes.

"There has been a shift away from baskets of indexes," said one market source when asked about the fact that the indexes are linked individually to the notes.

"Some of the smaller [emerging markets] indexes are being clumped in baskets, but the retail investors really want notes that are linked to just one index from what I've seen."

Euro Stoxx, S&P, Nikkei linked

Among the indexes linked to the slate of JPMorgan notes was the Dow Jones Euro Stoxx 50 index. Those 0% buffered return enhanced notes have a one-year term and are set to price Nov. 17.

At maturity, the notes pay twice the appreciation of the index with a maximum return of 14%. The maximum return rate will be set at pricing, but will not be less than 14%.

If the index declines by more than 10%, the investors will lose 1.1111% of their principal for every 1% beyond 10% the index declines.

Nikkei notes

Also, JPMorgan plans to price 0% annual review notes linked to the Nikkei 225 index.

The three-year notes, set to price Nov. 17, may be called on any of three review dates. The investors will receive par plus a call premium if the notes are called on the review dates equal to at least 10.7% for the first review date, at least 21.4% for the second review date and at least 32.1% for the third review date.

However, if the notes are not called, the principal is protected up to a 15% decline in the index. The investors will lose 1.1765% of their principal for every 1% below 15% the index declines.

The Nikkei has been a popular index in the past month, being linked solely to several note deals.

JPMorgan priced $4.06 million in 0% buffered return enhanced senior notes linked to the Nikkei on Nov. 6 and Merrill Lynch & Co., Inc. priced $162 million in 0% accelerated return notes linked to the index on Nov. 2.

Back in October, Morgan Stanley priced $5.78 million in 0% capital-protected notes linked to the index.

S&P notes

The investment bank also plans to price 0% annual review notes linked to the S&P 500 index.

The notes have much the same terms as the Nikkei-linked notes but the premiums will be at least 8%, 16% and 24% for each of the three review dates, respectively.

The notes have a term of three years and if not called on any of the review dates are protected up to a 10% decline in the index.

If the index drops below the 10%, the investors will lose 1.1111% for every 1% beyond 10% the index drops.

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