Bank of Nova Scotia’s Scotiabank unit sold $131.8 million of structured notes tied to an index of securities picked by Raymond James Financial Inc., the bank’s largest offering this year.
The three-year securities, issued Sept. 18, yield the gains and losses of the Raymond James Analyst Current Favorites Total Return Index with all capital at risk, according to a prospectus filed with the U.S. Securities and Exchange Commission. The index needs to rise at least 4 percent for the notes to become profitable. Raymond James distributed the securities for a 2.5 percent fee. Scotiabank may charge 1.05 percent in additional index and structuring fees until maturity.
The latest picks include insurer Allstate Corp., technology company Qualcomm Inc., timber harvester Rayonier Inc. and restaurant chain operator Red Robin Gourmet Burgers Inc., according to a Sept. 16 publication of analyst favorites. These companies would be included in the index, Jana Strange, a spokeswoman for the company, said in an e-mail.
Joe Konecny, a spokesman for Scotiabank, didn’t return a voicemail seeking comment on the securities.
Bank of Montreal has previously issued notes tied to the St. Petersburg, Florida-based firm’s stock picks, Bloomberg data show. The Toronto-based bank sold a total of $191 million of notes in December and January that yield the gains of the stocks or American depositary shares chosen as “best picks,” according to prospectuses filed with the SEC.
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.