Barclays appears to be readying to expand its structured product offerings in the US by adding warrants to its product line-up. This would be the first time Barclays issues warrants in the US, according to SRP historical data.
In a structured products product brochure first filed with the US Securities and Exchange Commission (SEC) on August 15, the bank explains three main structured products groups within which it offers investments including "synthetic convertible" notes, YEELDS – a branded product that offers a regular coupon that Barclays inherited from its purchase of portions of Lehman Brothers – and warrants.
The Barclays filing includes a risk scale indicating that synthetic convertible notes are the least risky of the trio, with cautionary language about warrants having the most risk.
The brochure is targeted at institutional investors and explains that all three product groups are subject to the credit risk of Barclays.
The brochure also explains that the main features of the warrants include providing leveraged participation linked to the performance of an underlying asset; no provision for income payments; that the purchase price per warrant will be a percentage of the notional exposure; that the investor may receive cash or shares of the underlying asset at maturity or upon early redemption via a call feature; and that investors can lose 100% of their assets if, at expiration, the final price of the underlying is below the original strike price.
While a warrant is similar to an option in that it has a strike price and an expiration date, warrants are issued by companies trying to raise capital whereas options are issued by brokerages or individual investors and can be listed on an exchange. Warrants also tend to have longer expiration periods than options.
Year to date through to 22 August, 15 warrants have been issued in the US structured products market, 10 of which were issued by Deutsche Bank and the other five by UBS. In 2013, eight warrants were issued in the US, half of which were issued by Deutsche Bank and UBS. In the previous year, 2012, only four warrants were issued, three from Credit Suisse and one from Deutsche Bank. For all of 2011, only three warrants were issued, all from JPMorgan.
According to SRP data, there are 32 live call warrants in the US market including 19 warrants issued by Deutsche Bank, 11 warrants issued by UBS, one issued by Credit Suisse and a 30-year callable/uncapped call warrant issued by IndyMac Capital Trust in 2011.
Barclays declined to comment for this article.
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