SRP examines US structured notes potentially impacted by the recent bearish performance of Boeing shares.

Shares of Boeing Co (BA) have tumbled since the Alaska Airlines incident of 5 January, which has also led to other problems including delays of its delivery of 737 MAX jets to China. The shares opened at US$210.89 today (19 January), down 16.2% year-to-date.

Several products in the US have failed to autocall because of the share’s underperformance year-to-date, filling some investors with the jitters

The price was 20.2% lower from the last peak seen on 15 December after briefly falling below US$200 intraday on 16 January.

Boeing is a popular underlying asset for autocallable notes, particularly in Switzerland, the US and Taiwan, SRP data shows. There are over 1,000 leveraged certificates listed in Germany tracking the share.

Several products in the US have failed to autocall because of the share’s underperformance year-to-date, filling some investors with the jitters.

Meanwhile, most of the live products linked to the NYSE-listed airplane manufacturer remain in the safety zone in terms of coupon and final payout, SRP data also shows. A spot level below US$180 for Boeing shares would start to have a noticeable impact as many of the products were traded with a strike level between US$200 and US$240.  

In the US where phoenix structures dominate, 108 autocallable notes linked to Boeing shares with a principal amount of US$261.6m have observation dates in the first quarter of 2024. By underlying, single stock, share baskets and hybrid assets account for 29, 75 and four of the products, respectively.

Products linked to the share of Boeing solely were primarily issued in the second half of 2023 when the shares traded between US$190 and US$245. The phoenix structures feature a coupon barrier and trigger levels of between 50% and 85% of the strike levels, and averaged contingent coupon of 8.63% pa.

Only two of them are fixed coupon notes, offering 8.7% and 9.82% pa with a trigger level at 75% of the strike level, respectively.

With an average 2.2-year tenor, these products will start to mature from April. The rest of January will see eight products solely linked to Boeing potentially get autocalled.

Due to the most recent sluggish performance of the underlying shares, two products (SRP ID: 30324019 and 43300529) missed the autocall triggers on their last quarterly observation dates – 9 January and 16 January, respectively. Boeing’s stock closed lower than their respective trigger levels north of the US$250 determined in April 2021. 

Their performance will be measured upon final review in mid-April 2024. Investors will take a loss at the amount equivalent to the stock return if the Boeing shares close below US$164.03 and US$150.67, respectively.

Additionally, there are 75 worst-of autocallable notes at US$178m linked to share baskets including Boeing with a longer average tenor of four years.

The Boeing share appears alongside  the shares of Amazon, Apple and Meta on several baskets. Other baskets include the shares of Raytheon and Lockheed Martin, two of Boeing’s competitors, which act as the underlyings of four products.

A majority of the worst-of notes are also phoenix structures with a strike level from US$147.41 to US$262.02 and a coupon barrier/trigger level of 50% to 85% of the strike level. 

2023

In the US, a total of 111 structured notes linked to Boeing shares were issued by a group of 13 banks led by UBS in 2023. Their combined traded notional reached US$196m.

Boeing’s stock was relatively flat in the first six months of 2023, hovering around US$195.39 and US$221.56 before taking a dip in September and hitting a yearly low of US$177.73 on 25 October.

With an average tenor of two years, 74 products are linked to the single shares with a trigger level from US$177.73 to US$262.06 while the reminder are linked to share baskets, also featuring the shares of Amazon and Bank of America.

For the 37 products linked to share baskets, the trigger levels of Boeing range from US$191.41 to US$263.51.

By payoff, 86 of the structured notes are autocallable, half of which are observed on a quarterly basis. The issuance was more active in the first half of 2023 when Boeing shares bounded between US$200 and US$220.

Besides the classic autocall, known as Athena, the payoffs cover airbag, buffer and memory features. The 15 products remaining are deployed with digital, capped participation, callable or leveraged upside options.

Only nine of the products are fully principal-protected with a typical coupon barrier at 80% of the trike level.

For the non-principal protected autocallable notes, a majority are phoenix structures featuring coupon barrier/trigger price between 50% to 80% of the trigger level.

There are also nine snowball structures with trigger price between 50% to 80% of the trigger level, offering fixed coupon of 8.15% to 10.92% pa.