Citigroup prices $77.75 million in trust certificates; Bear, Barclays plan U.S. Steel-linked notes

By Sheri Kasprzak

New York, Nov. 29 - Citigroup Funding Inc. led structured products news Wednesday as the company priced $77.751 million in principal-protected trust certificates linked to the Dow Jones Industrial Average and the Nikkei 225 stock average.

"It [a trust certificate] works the same way as a note linked to an index basket would work," said a market source familiar with the securities.

"You're still relying on the performance of the basket in order to make a return on your investment. The difference is you have the features of both equity and fixed-income [offerings]."

In the case of these certificates, the investors may exchange, before maturity, each $10 principal amount of the trust certificates for one equity index participation security with a $10 face amount and one equity index warrant with a $10 notional amount.

Terms of the certificates

Under the terms of the 31/2-year certificates, the payout at maturity will be par plus any positive return on the basket. The investors can expect to receive at least par at maturity.

At maturity, each equity index participation security will pay a redemption amount equal to $10 multiplied by the percentage change in the basket.

The equity index warrants will be automatically exercised at maturity. If the value of the underlying basket increases or does not change, the warrants will pay zero. If the value of the basket decreases, the warrants will pay a positive amount equal to $10 multiplied by the percentage decrease in the basket.

Bear, Barclay's reverse convertibles

Elsewhere in structured products, Bears Stearns Cos., Inc. and Barclays Bank plc both announced plans Wednesday to price reverse convertibles linked to the stock of United States Steel Corp.

Both notes carry an 80% protection level. The three-month Bear notes carry a 17% coupon and the six-month Barclays notes a 15% coupon.

U.S. Steel has popped up as a reference stock linked to reverse convertibles before, including an $8 million offering priced by Barclays back in August. Those notes carried a 13% coupon. Also in August, Bear Stearns priced $3 million in reverse convertibles linked to U.S. Steel, with a 20% coupon. Earlier this month, ABN Amro Bank NV priced $675,000 in 13% reverse convertibles linked to the stock.

Whole Foods-linked notes

In other reverse convertibles news, Bear Stearns said Wednesday it plans to price 14% reverse convertibles linked to Whole Foods Market Inc.

The six-month, 14% notes carry an 80% protection level.

Barclays priced similar notes earlier in the month with a $2 million offering with a 12.5% coupon and a $1.5 million offering with a 9.5% coupon. The investment bank also priced $3 million in 12.55% reverse convertibles linked to the grocer in November.

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