RBC Sells Largest Structured Note Tied to Blackstone Shares

Oct. 3 (Bloomberg) -- Royal Bank of Canada sold $18.3 million of three-year notes tied to Blackstone Group LP, the largest offering linked to the buyout firm since at least January 2010.

The securities, issued Sept. 27, yield 11.2 percent a year as long as the company doesn’t fall below 75 percent of its initial value with all capital at risk, according to a prospectus filed with the U.S. Securities and Exchange Commission.

The notes are automatically redeemed starting in three months if the stock price hasn’t declined from its initial value. RBC estimated their value at time of sale at 96.3 cents on the dollar.

Blackstone, the largest buyout firm, rose 63 percent this year to $25.35 a share at the close of trading yesterday.

Kait Conetta, a spokeswoman in New York for the Toronto-based bank, declined to comment on the securities.

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