Svensk Exportkredit, Goldman plan notes linked to Dow Jones - AIG Commodity index

By Sheri Kasprzak

New York, Sept. 20 - AB Svensk Exportkredit and The Goldman Sachs Group, Inc. grabbed structured products headlines Wednesday as both priced notes linked to the Dow Jones - AIG Commodity index.

In other structured products news Wednesday, Merrill Lynch & Co., Inc. priced $79 million of notes inversely linked to the PHLX Housing Sector index.

Svensk priced $125 million total return linked notes linked due Oct. 25, 2007. The notes bear interest at Libor minus 24 basis points.

The payout at maturity will be determined based upon the performance of the index. At maturity, investors will receive par plus triple the positive or negative return on the index, less 25 basis points for fees, less the 91-day Treasury bill yield.

The notes will be called if the index hits 65% of the initial level.

Holders can put the notes back at any time and receive a payout calculated in the same way as that at maturity.

Morgan Stanley was the manager for the sale.

Similarly, Goldman priced $40 million of floating-rate excess return notes due Oct. 31, 2007 linked to the performance of the Dow Jones - AIG Commodity index, according to a 424B3 filing with the Securities and Exchange Commission.

At maturity, the notes pay par plus three times the return on the index, less three times a fee assessed at a 23 basis points annual rate.

The notes will be automatically called if the index closes at or below 88% of its initial level.

Investors who own all the notes they originally bought can put them back to Goldman at any time in return for a payment calculated using the same formula as the payment at maturity.

Other commodity index deals

These are not the only notes announced this week that are linked to a commodity index. On Tuesday, ABN Amro announced its plans to price two notes linked to the Rogers International Commodity Index - Agriculture Excess Return, an index that serves as a benchmark for price movements of agricultural commodities consumed in the global economy.

The notes include 0% index out-perform notes due Sept. 29, 2010 and 0% principal protected notes due March 29, 2011.

With regard to the out-performance notes, if the index gains, investors will receive a cash payment at maturity equal to par plus the return on the index multiplied by a participation rate of between 1.55 and 1.65, with the exact level to be set at pricing. If the index return is negative, the payment at maturity will be par less the loss on the index.

As to the principal-protected notes, at maturity, for each $1,000 in principal purchased, the notes pay the sum of the $1,000 principal amount and the supplemental redemption amount. The supplemental redemption amount will be equal to the product of the percentage return on the value of the underlying index and $1,000. The supplemental redemption amount for each $1,000 in principal cannot be less than zero.

Both notes are set to price Sept. 26.

Merrill's Bear Market notes

Meanwhile, Merrill Lynch priced $79 million in 0% Accelerated Return Bear Market notes linked to the PHLX Housing Sector index.

"Clearly, the housing market is on a downward slide in general," said one equity structurer when asked about the appeal of the Bear Market notes linked to the PHLX index. "Indexes, like the PHLX that includes lots of housing-related [businesses], you'd be safe to assume they're also going to hit that downward slide as well."

The notes, due June 20, 2007, pay triple the absolute value of any decrease on the index, capped at a maximum total payment of $13.10 per $10.00 note. Conversely, the investors will lose 1% for each 1% gain on the index with a maximum loss of $5.00 per $10.00 note.

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