Goldman strikes gold & oil for KBC | MTN-i

Hefty coupon with 75% digital barrier, based on the crude oil backwardation....financed by the at-maturity knock-in put.... Interesting!

Goldman Sachs found demand for an unusual KBC Ifima commodity duo, delivering a gold volatility play and a crude oil knock-out note.

The USD5.48m 3-year crude oil play has a starting index of 1,107.11, a strike of 830.33, and semi-annual observation dates. If the oil price at the observation dates is greater than or equal to the starting index, the deal is trigger called, paying 106.5% after the first six months and stepping up 6.5% semi-annually thereafter. At maturity, the investor receives the notional amount if the end index is greater than or equal to the strike price, or the notional multiplied by the end index divided by the strike.

The USD5.3m gold-linked bullet is capital guaranteed, and pays at maturity a coupon linked to the range in which gold has traded over the life of the deal. If the price has never fixed outside 398-458 USD/oz, the note pays a 10% coupon; for 391-465, 7%; for 381-475, 1%; otherwise zero (barriers included).

Today"™s deals are the only identified in their respective formats this year - only four other deals year-to-date have referenced crude oil, including UBS"™s innovative oil volatility/Libor range hybrid, while KBC and Nomura"™s gold range accruals have accounted for four of the seven reported notes in the sector. Total commodity-linked volume for 2005 stands at just under USD1.1bn-equivalent, not far short of the USD1.4bn achieved in the same period last year.