US Wrap: Industrial-based reverse convertibles dominate issuance

Reverse convertibles dominated yesterday's US public offerings, with Royal Bank of Canada (RBC) issuing most of the notes, and industrials providing the underlying on all but one of the notes, which is based on the Las Vegas Sands resort.

RBC's three-month reverse convertible notes linked to Las Vegas Sands pay a monthly income equivalent to a 13.6% annual rate. There is a 65% protection barrier, after which investors' capital will be lost at a rate of 1:1. The resort also provides the underlying for Royal Bank of Scotland's three-month notes, which offer a 10.5% annual rate.

The S&P index is again a popular underlying. Bank of America's review product is a two-year investment based on the index. There are three review dates during the life of the investment; if the index is at or above its initial level on any of these dates, the product will kick out and investors will receive a fixed payout. If the index finishes below 90% of its strike level, capital will be lost on a 1:1 basis.

Eksportfinans is the only non-bank issuer to join the offerings. The Norwegian institution for export and financing has issued an accelerated growth product with no principal protection but with a 300% participation rate and a cap of 13–17%. The accelerated return notes are linked to the MSCI EAFE index of European, Australasian and Asian equities and are investments of one year and two months.

 

 

 

 

 

 

 

 

 

 

Source: FVC and SEC filings

For access to analysis of the US structured products market: www.structurededge.com