National Bank of Canada (NBC) is rolling out a new reverse convertible for the Canadian market, a structure rarely seen in these latitudes, though prevalent in the neighbouring US.
Maturity-Monitored Barrier, a growth note, has a twelve-month maturity and is linked to the common shares of Research In Motion. It pays a 10.85% coupon at maturity plus capital return equalling 100% of principal if the final share level is greater than 80% of its initial level, with one-for-one downside otherwise, floored at 1%.
New NBC's reverse convertible is distributed via National Bank Financial and Desjardins, which will act as an independent agent and be paid an overall commission of 1.25%.
NBC first launched reverse convertibles in January 2007 and issued another in 2008. Its three 2007 reverse convertibles also had a one-year tenor, and were linked to the common shares of Bombardier, Goldcorp or Suncor Energy, with coupons ranging from 9.5% to 14% and soft protection of 80%. In 2008, NBC launched Skylon Big Five Barrier Return of Capital S1, a five-year combined reverse convertible, uncapped call, worst-of option structure linked to the shares of five Canadian banks with a 7.5% coupon and 50% soft protection.
NBC has issued 95 CA tranche products year to date, with the following by-wrapper split: guaranteed investment certificates (GICs, 57), principal-protected notes (PPNs, 22), and notes (17). Only two other providers have issued reverse convertibles this year in Canada: Bank of America Merrill Lynch and Credit Suisse, both with a five-year term and a combined knockout, reverse convertible, worst-of structure linked to global equities.
This product is available now in Recent Additions (Canada).