Kempen has launched a second tranche of the VL Participation Note Banks Europe 17-22 in the Netherlands. The original product, which was introduced in October 2017 for an issued amount of €10m, completely sold out and the merchant bank is now selling a second version - also with a size of €10m - whose features are identical as those of the first product. The five-year note is listed at Euronext Amsterdam and participates 205% in the positive performance of the Stoxx Europe 600 Banks Index.
"It is very easy to increase an issue and therefore we can keep it fairly efficient," said Laurent Guntenaar (pictured), director, structured investments at Kempen.
"Before we launch a product, we estimate how much we think we will be selling," said Guntenaar. "We don't unnecessary want to keep a lot of our paper on the shelf, so to say. If we think the product will sell less than €10m, we will be issuing €10m, and if we think we will sell more than that we may be issuing €20m."
When you increase a product in size, it can be in any amount, especially when it comes to public offers, also because the secondary market keeps going continuously after the subscription period is closed, according to Guntenaar. "Everything goes via the exchange, so with public offers we want to be a little bit more flexible when it comes to how much paper we keep on the shelf, especially compared to tailor made products, when we are usually a little bit tighter," he said adding that for public deals you do want to "make sure that you have sufficient stock".
The original product was issued because the investment office of Van Lanschot had a positive view on banks and on the Stoxx Europe 600 Banks Index. "You can recommend an ETF if you want to go along with the bank's vision, or, for example, a participation note, which, as opposed to an index guarantee note or a trigger note, offers a leveraged participation in the index," said Guntenaar.
Although the new product was launched on March 19, 2018, its strike level is the same as that of the first version (188.17 - the closing level of the index on October 6, 2017). The note is available in denominations of €1,000 and is issued at 96% of the aggregate nominal amount.
"What we have seen in the past few weeks is that the financial markets have come down, and the banks have come down too, and that the product is trading below the issue price," said Guntenaar. "That's when it becomes interesting for many advisers to get involved, because we are still positive on the index, on the sector.
"As an investor you can start buying banks, the underlying shares, or you can opt for the participation note, which currently is available at an issue price of 94% and has a participation rate of 205%," said Guntenaar. "That makes it an interesting product which you can buy for less than 100 and if you have a positive view on the equity markets for the coming period, and specifically for the banking sector, you can participate with a 2x leverage."
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