RBC Sells Largest Note Tied to Whirlpool Since January 2010

Royal Bank of Canada sold $45.2 million of one-year notes tied to Whirlpool Corp. (WHR), the largest such offering in at least two and a half years.

The securities, issued July 15, yield 11 percent a year as long as Whirlpool doesn’t decline, plus 5.4 percent more if the stock climbs at least 11 percent, with all capital at risk, according to a prospectus filed with the Securities and Exchange Commission. Bank of America Corp. distributed the notes for a 1.75 percent fee.

Whirlpool, the world’s largest appliance maker, rose 19 percent this year to $120.60 as of the close of trading yesterday.

Raymond James Financial Inc. (RJF) raised its one-year price target to $130 yesterday from $125, according to a research report made available yesterday. U.S. shipments of major household appliances rose 3.6 percent in June, the Association of Home Appliance Manufacturers said July 16.

Investors have bought $4.72 million of notes tied to Whirlpool in 14 offerings since January 2010, when Bloomberg started collecting comprehensive data on the securities. RBC issued the next largest deal, $2.62 million of six-month notes, on Dec. 15, 2010.

RBC estimated that the latest securities were worth 97.1 cents on the dollar at the time of sale, according to offering documents.

Kait Conetta, a spokeswoman for the Toronto-based bank, declined to comment.

Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts whose value is derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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