Structured Investor Products
April 20, 2004
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CONFIDENTIALITY
The information in this document is the property of and subject to revision at the discretion of Credit Suisse First Boston ("CSFB"). It
and any further confidential information made available to you must be held in complete confidence and documents containing such
information may not be used or disclosed without the prior written consent of CSFB.
IMPORTANT DISCLAIMER
By entering into a transaction with CSFB, you acknowledge that you have read and understood the following terms: CSFB is acting solely as an
arm’s length contractual counterparty and neither CSFB nor any affiliate is acting as your financial adviser or fiduciary unless it has agreed to so
act in writing. Before entering into any transaction you should ensure that you fully understand its potential risks and rewards and independently
determine that it is appropriate for you given your objectives, experience, financial and operational resources, and other relevant circumstances.
You should consult with such advisers as you deem necessary to assist you in making these determinations. You should also understand that
CSFB or any affiliate may provide banking, credit and other financial services to any company or issuer of securities or financial instruments
referred to herein, underwrite, make a market in, have positions in, or otherwise buy and sell securities or financial instruments which may be
identical or economically similar to any transaction entered into with you. If we make a market in any security or financial instrument, it should not
be assumed that we will continue to do so. Any indicative terms provided to you are provided for your information and do not constitute an offer,
a solicitation of an offer, or any advice or recommendation to conclude any transaction (whether on the indicative terms or otherwise). Any
indicative price quotations, disclosure materials or analyses provided to you have been prepared on assumptions and parameters that reflect
good faith determinations by us or that have been expressly specified by you and do not constitute advice by us. The assumptions and
parameters used are not the only ones that might reasonably have been selected and therefore no guarantee is given as to the accuracy,
completeness, or reasonableness of any such quotations, disclosure or analyses. No representation or warranty is made that any indicative
performance or return indicated will be achieved in the future. None of the employees or agents of CSFB or any affiliate is authorized to amend or
supplement the terms of this notice, other than in the form of a written instrument, duly executed by an appropriately authorized signatory and
countersigned by you.
Please refer to the Important Notice on Page 2 of the Presentation Book.
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Case Studies of Actual Products Traded
• Simple CLN (Single Name or Basket)
• First to Default Basket CLN
• Principle Guaranteed Basket CLN
• Sherlock CLN and yield enhancement
• Repos & Total Return Swaps
• Bond-linked Note
Please refer to the Important Notice on Page 2 of the Presentation Book.
Simple CLN (Single Name or Basket)
• For Single Name CLN, investor takes the risk on a single
entity. Risk is equivalent to lending to that entity.
• For Basket CLN, investor takes the risk on several entities
where risk per entity is limited to its weighting in the
basket.
• Basket is the economic equivalent of executing multiple
CLNs at the same time, with the same maturity.
• Basket allows for diversified risk in small sizes and
savings from simplified documentation process.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Simple Basket CLN
Issuer:
Noteholder:
Notional Amount:
Tenor:
Reference Entities :
Interest:
Obligation:
Deliverable Obligation:
Credit Event:
Adjustment following a
Credit Event:
the
Notional
be adjusted to
remaining Reference
CSFB Nassau Branch (A+/Aa3)
XYZ
USD 10,000,000
5 years
Investment Grade Asian Sovereign Basket
People’s Republic of China, Republic of Korea and Malaysia (33.33%
each)
LIBOR plus 0.50% per annum
Any G7 currency bond or loan of the Reference Entities.
Any G7 currency bond or loan of the defaulted Reference Entity.
Failure to Pay, Repudiation/Moratorium, Restructuring.
Deliverable Obligations will be delivered with a face amount equal to
proportion of the defaulted Reference Entity in the basket, the
Amount will be reduced by that amount and the coupon will
reflect the weighted average of the spreads of the
Entities.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Simple Basket CLN
USD 10,000,000
Initial Exchange
XYZ
CSFB
US$10M Note
Default options exercisable on Credit Event
Periodic Payments
XYZ
CSFB
LIBOR + 0.50% semi-annually on US$10M
Upon a Credit Event
of Malaysia sovereign
Periodic Payments /
Final Exchange
XYZ
CSFB
XYZ
CSFB
US$3.33M principal
of Malay sovereign debt
Notional Amount is reduced by 1/3 and coupon is
adjusted
Default options on remaining Reference Entities
US$6.67M principal
CSFB
Please refer to the Important Notice on Page 2 of the Presentation Book.
1st to Default CLN
• For a First to Default CLN, investor takes on the risk of the
first entity in a basket to default. The risk is limited to
principal and any accrued but unpaid interest on the CLN.
• Allows for significant yield enhancement and
diversification of risk to several entities in the basket.
• Risk is equivalent to lending to the first entity in the basket
to default.
Please refer to the Important Notice on Page 2 of the Presentation Book.
1st to Default Basket CLN
Issuer:
Noteholder:
Notional Amount:
Tenor:
Reference Entities :
Interest:
Obligation:
Deliverable Obligation:
Entity.
Credit Event:
Restructuring.
Adjustment following a
Credit Event:
equal to
CSFB Nassau Branch (Aa3/A+)
XYZ
USD 10,000,000
5 years
Asian Corporate Basket
CNOOC, Citic Pacific Ltd, Hutchison Whampoa Ltd.
LIBOR plus 1.80 % per annum
Any G7 currency bond or loan of the Reference Entities.
Any G7 currency bond or loan of the defaulted Reference
Bankruptcy, Failure to Pay, Repudiation/Moratorium,
Deliverable Obligations will be delivered with a face amount
the Notional Amount and the note will be cancelled.
Please refer to the Important Notice on Page 2 of the Presentation Book.
1st to Default Basket CLN
USD 10,000,000
Initial Exchange
CSFB
XYZ
US$10M Note
Default option exercisable on Credit Event
Periodic Payments
XYZ
CSFB
LIBOR + 1.80% semi-annually on US$10M
No Credit Event
Upon a Credit Event of any Reference Entity
US$10M principal of the defaulted
Reference Entity
US$10M + all interest
XYZ
CSFB
XYZ
CSFB
No further payments made by CSFB post-Credit Event
Please refer to the Important Notice on Page 2 of the Presentation Book.
Principle Guaranteed Basket CLN
• If the market value of the portfolio of Reference
Obligations falls below a floor price (e.g. 40%), a Credit
Event is triggered and no further interest payments will be
made on the notes. At maturity investor will receive 100%
of principal.
• Risk is to a sharp fall in the bond price of the Reference
Obligations. Risk is limited to interest coupons. Principal
is protected.
• Term has to be longer e.g. 10 years, for there to be value.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Principle Guaranteed Basket CLN
Issuer:
Noteholder:
Notional Amount:
Tenor:
Reference Entities :
Interest:
Obligations:
Credit Event:
Floor.
Bond Floor:
Adjustment following a
Credit Event:
CSFB Nassau Branch (Aa3/A+)
XYZ
USD 10,000,000
10 years
CNOOC, Citic Pacific Ltd, Hutchison Whampoa Ltd.
[6.30] % per annum
CNOOC 13, Citic Pacific 11, Hutch 13
The clean price of the Obligations trades at or below the Bond
40% of the clean price of Obligations on Trade Date.
All future interest payments will cease and the investor will receive
100% of the principal on the Maturity Date.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Principle Guaranteed Basket CLN
USD 10,000,000
XYZ plc
Initial Exchange
CSFB
US$10M Note
Put option struck at Bond Floor
XYZ plc
Periodic Payments
CSFB
6.30 % semi-annually on US$10M,
contingent on Credit Event
Upon a Credit Event
XYZ plc
Interest Payments
CSFB
No further interest payments are made – no Obligations are
delivered.
Maturity Date
XYZ plc
USD 10,000,000
CSFB
CSFB
Please refer to the Important Notice on Page 2 of the Presentation Book.
Sherlock Collateralized CLN
• Investors purchase a CLN from a Special Purpose Vehicle,
Sherlock. Sherlock uses the proceeds from the CLN to
invest in any collateral that investor requires e.g. “AAA”
rated bonds, CSFB bonds, PRC bonds, etc.
• Risk is to the Reference Entity and also to the issuer of the
collateral. Significant yield enhancement comes from yield
on collateral.
• If Reference Entity experiences Credit Event, collateral is
sold at its market value and the proceeds exchanged for
Obligations of the Reference Entity. These are delivered to
investor.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Sherlock Collateralized CLN
Issuer:
Notional Amount:
Tenor:
Reference Entities :
Sherlock (“SPV”)
USD 10,000,000
5 years
CNOOC, Citic Pacific Ltd, Hutchison Whampoa Ltd.
collateralised by “AAA” rated tranche of CDO
Interest:
LIBOR plus [2.80] % per annum
Obligation:
Entities.
Deliverable Obligation:
Entity.
Credit Event:
Adjustment following a
Credit Event:
after
Specified G7 currency bonds or loans of the Reference
Specified G7 currency bonds or loans of the defaulted Reference
Bankruptcy, Failure to Pay, Repudiation/Moratorium, Restructuring.
Deliverable Obligations will be delivered equal to the Notional Amount
deduction for collateral unwind costs.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Sherlock Collateralized CLN
Noteholders
Collateral Proceeds
US$ 10M
SPV .
US$10M Senior
Secured Notes
Paying LIBOR+2.80%
Reference
CSFB
Obligations
US$10m Obligations
less collateral unwind
costs
Yield pick-up
LIBOR +1.00%
US$ 10M
Junior
US$10m
AAA rated
CDOs
Please refer to the Important Notice on Page 2 of the Presentation Book.
Repos & Total Return Swap
• Investor purchases CLNs or bonds, pledges the CLNs or
bonds as collateral in a total return swap.
• Investor receives more funds (equal to the haircut applied
on the CLNs or bonds) and pays repo rate for the funds.
• Allows for increased returns through leverage and better
utilisation of existing funds.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Total Return Swap
Sherlock CLN
Notional Amount: USD 10,000,000
Tenor:
5 year
Reference Entity : People’s Republic of China
Collateral in Sherlock:
CSFB Bonds due
2008
Interest:
LIBOR plus 0.60% per annum
Obligation:
Any G7 currency
bond or loan
Deliverable Obligation:Any G7 currency bond or
loan
Total Return Swap
Notional Amount: USD 6,000,000
Tenor:
1 year
Initial Portfolio:
USD 10M PRC-linked
Sherlock
CLN
Haircut:
40%
Interest rate:
LIBOR + 0.15% per annum
Margining:
90% top-up, 110%
top-down
Net Expected Returns per annum
Returns from CLN:
USD 16M *0.60% = USD 96,000
Payment for TRS:
-(USD 6M *0.15%) = - USD 9,000
Net Return on USD10m:
USD 87,000 i.e. LIBOR plus 0.87%
Please refer to the Important Notice on Page 2 of the Presentation Book.
Total Return Swap
US$ 10,000,000 +
pledge of USD 10M note
Leveraged CLN
CSFB
XYZ
US$10M Note +
US$ 6M Note
L + 0.15% pa on US$ 6
mln
Periodic Payments
XYZ
XYZ plc
CSFB
CSFB
L + 0.60% pa on US$ 16 mln
Final Exchange,
no Credit Event
US$6 mln
XYZ
CSFB
US$16 mln
Final Exchange,
Credit Event
XYZ
US$6 mln
CSFB
US$16 mln of
PRC Obligations
Please refer to the Important Notice on Page 2 of the Presentation Book.
Collateral is subject
to margining
Bond Linked Note
• Fixed or floating rate note with embedded put option on bonds.
Principal only is subject to the price risk of a specified bond issue.
Interest is guaranteed.
• If the price of the bond is below a strike price chosen by the investor
on the maturity date, CSFB has the right to deliver bonds with a face
amount equal to the Notional Amount of the Note.
• As an alternative to buying cash bond. Investors achieve liquid
exposure to a bond and yield enhancement in the short term. If put
option is exercised, investor receives underlying bonds at a lower
price and higher yield than what they would get today in the cash
market.
Please refer to the Important Notice on Page 2 of the Presentation Book.
Bond Linked Note
Issuer:
Noteholder:
Notional Amount:
Maturity:
Reference Entity:
Obligation:
Cash Price:
Strike Price:
Interest:
CSFB Nassau Branch (Aa3/A+)
XYZ
USD 10,000,000
6 months
Hutchison Whampoa International
6.25% Fixed rate bonds maturing 13 Feb 2013
[103.40%] (current yield: LIBOR +1.50%)
[101.40%] (2% below Cash Price)
LIBOR + 3.50% pa
If at Maturity in 6 months, XYZ receives the Bonds at 101.40%, yield will be higher
e.g. LIBOR +1.80%
Please refer to the Important Notice on Page 2 of the Presentation Book.
Bond Linked Note
US$ 10,000,000
Initial Exchange
XYZ
CSFB
US$10M Note
Put option
Periodic Payments
XYZ
CSFB
LIBOR + 3.50 %
Price is > 101.40% on maturity
Price is <= 101.40% on maturity
US$10M + interest
XYZ plc
CSFB
XYZ plc
US$10M principal
of debt
Please refer to the Important Notice on Page 2 of the Presentation Book.
CSFB