Merrill prices $175 million notes linked to commodity index, $26.5 million in currencies-linked notes

By LLuvia Mares and Sheri Kasprzak

New York, Nov. 7 - Merrill Lynch & Co. frequently surprises market insiders with its creativity and innovation in structured products.

The latest impressive offering came Wednesday when Merrill priced $175 million Accelerated Return Notes due linked to the Rogers International Commodity Index - Excess Return.

"It is a great-looking product," said one market insider.

"It looks like they have raised a good amount and its good value to investors - a smart way to play commodities for certain investors and obviously they responded to it."

Another creative offering was priced by Merrill on Wednesday, this one linked to three baskets of global currencies.

Merrill priced $26.5 million in zero-coupon principal-protected notes linked to three baskets of global currencies, including an Americas basket, a European basket and an Asian basket of currencies.

"It is interesting to see something linked to three separate currency baskets," said one market insider Wednesday.

"It probably has more to do with conditions in the U.S. market than it has to do with any of the currencies. Investors are looking more to emerging markets currencies and I think this is just an extension of that."

Lower volatility makes the emerging markets currencies more appealing, the market source noted.

Rogers-linked notes details

The 14-month notes linked to the Rogers International Commodity Index - Excess Return pay par plus triple any gain on the index, capped at 28.31% at maturity, assuming the ending index value is greater than the initial value of 3,301.34. If the ending index value is less than the initial value, the investors will be exposed to the decline.

"I always like the two or three times upside type notes," said the market insider.

"This one looks like it is going to be a little over a year opportunity to have 28% and the index that underlies it is a good one that has a little bit less in terms of energy. The fact that you get up to 30% on the index over a year I think it is terrific."

Currencies notes details

The two-year notes linked to the global currencies baskets pay par plus the principal amount times the highest performing basket return times the participation rate of 119%, if the highest-performing basket level is greater than its initial level at maturity.

If the highest-performing basket level is lower than the initial level, investors will receive par at maturity.

The notes are linked to an Americas currencies basket that includes the Brazilian real, the Mexican peso and the Argentine peso. The European currencies basket includes the Norwegian krone, the Hungarian forint and the Russian ruble. The Asian currencies basket includes the South Korean won, the Malaysian ringgit and the Singapore dollar.

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