Eksportfinans prices $27.561 million in notes linked to Topix index; Rabo plans 32.5% reverse convertibles

By Sheri Kasprzak

New York, April 9 - Heading up structured products action to kick off the week was a $27.561 million offering of enhanced participation index-linked notes from Eksportfinans ASA linked to the Topix index.

The zero-coupon, two-year notes pay a maximum redemption level of 142.8% of par if the final index level is greater than or equal the index cap of 110.7%. If the index level ends less than or equal to the index cap, the investors will receive par plus 400% of the index return. If the index return is less than the initial level, investors will suffer any losses on the index.

The Topix index tracks domestic stocks in Japan.

Rabo to price 32.5% reverse convertible

Moving to reverse convertibles news, Rabo Financial Products BV announced its plans to price a 32.5% reverse convertible note linked to InterOil Corp.

"We're seeing this a lot where the bigger coupons seem to go to the shorter-term notes," said one market source who wasn't familiar with the offering on Monday.

"I really can't comment without knowing more about it other than to say it's not unusual to see a huge coupon attached to a short-term note. A coupon that big is still pretty rare though."

Another market source said there are several factors to contend with when looking at coupons.

"You have to realize that investors are out to make a profit on these things," he said. "These are income-making tools. The sector matters, volatility matters, the particular reference stock matters."

Just last month, Rabo priced a 31% reverse convertible linked to InterOil. Those notes had a three-month term and an 80% knock-in level.

In February, Morgan Stanley priced $3 million in 22% High Income Trigger Securities linked to the stock. The HITS have a one-year term.

Terms of InterOil note

The three-month note pays par at maturity if the closing stock price is equal to or greater than the initial price. If the stock falls below the 80% knock-in level during the life of the notes and ends below the initial share price, the notes pay $1,000 divided by the initial share price.

Another short-term note with a substantial coupon is a 21% reverse convertible Rabo plans to price later this month linked to Elan Corp. plc. That note has an 80% knock-in level.

Even over the longer term, the coupons on reverse convertibles seem to be getting bigger.

For comparison's sake, Rabo plans to price a one-year note linked to Arch Coal, Inc. with a 12% coupon and an 80% knock-in level. The bank also has a 14%, one-year note lined up to be linked to Joy Global Inc.

Looking at another bank's offerings, Barclays Bank plc has a 9%, one-year note it intends to price later this month linked to the stock of ConocoPhillips Inc.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.