ABN Amro offers Asian sovereigns

Tag : discharge agent

ABN Amro in Singapore has launched the Power Asian Sovereign note,a first-to-default (FTD) credit-linked note offering exposure to abasket of Asian sovereigns. The note is a private placement inIndonesia.

The five-year US dollar-denominated product, which is not capitalprotected, is linked to an FTD basket of Asian sovereignscomprising Malaysia, the Republic of Indonesia, the Republic ofKorea, the Republic of the Philippines and the Kingdom of Thailand.The product will pay an indicative semi-annual coupon of 8% pa andredeem at par at maturity, provided none of the entities in thebasket suffers a credit event.
Should any entity suffer a credit event, such as bankruptcy orfailure to pay, the notes will cease to exist. If a credit eventshould occur the issuer shall pay a cash settlement amount whichconstitutes a complete discharge of all the issuers obligationsunder the note.
The cash settlement amount, with respect to the affected entity, isequal to the greater of: the product of the aggregate nominalamount and the weighted average of the final prices of eachobligation specified in the settlement notice minus the embeddedinterest rate swap (IRS) unwind amount, and zero.
The embedded IRS unwind means an amount determined by thecalculation agent equal to the cost of terminating the IRS embeddedin the note (the issuer pays amounts based on US dollar Libor plusa spread referable to the FTD credit risk embedded in the notes andreceives the interest amounts due on the notes). The IRS unwindwill be positive if payable by the issuer and negative if payableto the issuer.
The issuer has the right, but not the obligation, to call andredeem the notes on any interest payment date at 100% of par. Thenominal amount is US$5 million while each denomination is US$80,000with US$10,000 increments thereafter.
An early redemption fee of 2.5% is charged during the first sixmonths, while between the seventh and 16th months there is areduction of 25 basis points every month. There is no fee from the17th month.