US Wrap: Trickle of reverse convertibles begins week
Two reverse convertibles have been launched into the US market by ABN Amro, kicking off a slow start to the week. Both notes have a maturity of three months. One offers exposure to US energy company First Solar Energy, which manufactures solar panels. Investors will receive a 28% annualised coupon, payable monthly and receive back 100% of their principal in cash provided that the stock never falls below its 60% barrier during the life of the product. Otherwise investors will be repaid in cash.
The second note, which has yet to be priced, is linked to an SPDR Trust, an exchange-listed fund. The knock-in barrier is set at 70% and the annualised coupon is 11.5%. With each note, it is still possible to receive a repayment in cash provided that the underlying fund or stock is above its initial price at maturity, even if its barrier has been breached, which does give some potential for recovery to mitigate the loss of principal.
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