Deutsche Bank Sells Largest Structured Note Tied to Amazon Stock

Deutsche Bank AG sold $21.2 million of one-year notes tied to Inc., the biggest offering in at least four years linked to the world’s largest online retailer.

The securities, issued Jan. 16, yield 8 percent a year, plus an additional 4.25 percent if the company’s stock at maturity is at least 108 percent of its initial value, according to a prospectus filed with the U.S. Securities and Exchange Commission. Investors can lose all their capital if the shares plummet.

The Seattle-based company is competing with subscription-streaming leader Netflix Inc. with its $79-a-year Amazon Prime. The service also includes two-day shipping for most deliverable items.

“It’s basically a better mousetrap,” said Oliver Wintermantel, an analyst at International Strategy & Investment Group LLC in New York. Amazon increased its number of distribution centers globally last year, he said, which can make for speedier deliveries, though investors may be concerned the company “is expanding too fast.”

International Strategy & Investment affirmed its 12-month price target of $430 on Jan. 14. Amazon, run by Chief Executive Officer Jeff Bezos, rose 50 percent during the last year to $404.54 yesterday.

Investors bought $118.4 million of notes tied to the company in 44 offerings last year, according to data compiled by Bloomberg. That was up 32 percent from the year before.

Deutsche Bank estimated the notes’ initial value at 97.7 cents on the dollar, according to the prospectus. Bank of America Corp. distributed the securities for a 1.75 percent fee.

Oksana Poltavets, a spokeswoman for Deutsche Bank in New York, declined to comment on the offering.

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 with values derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

Before it's here, it's on the Bloomberg Terminal.