UBS AG sold $3.4 million of one-year securities linked to Dunkin’ Brands Group Inc., in what may be the first U.S. structured note tied to the fast-food chain.
The securities, issued Dec. 7, yield 9 percent a year as long as the stock doesn’t fall below 75 percent of its initial price of $23.58, according to a prospectus filed with the U.S. Securities and Exchange Commission. The notes are redeemed quarterly if the stock is at or above its initial value, and investors can lose their entire investment if the shares plummet. The bank distributed the notes for a 1.5 percent fee.
Dunkin’ Brands Group, the parent company of the namesake coffee chain, has gained 29 percent this year through yesterday to close at $32.11.
Single-serving portion packs of coffee have driven an increase in same-store sales for the company, said Marc Riddick, an analyst at Williams Capital Group LP in New York. “It’s been doing better than expected,” he said. Revenue is expected to increase 2 percent to $171.9 million by the end of the quarter from a year earlier, according to the average of analyst estimates compiled by Bloomberg.
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.