Synthetic innovation
IT Update
10
info exchange
What'S NewS Issue 3 March 1996
From le ft to right Raymond Plischke, Alex de Waal and Flans van den Brande
Rabo Securities has introduced another market innovation.
In January, it successfully placed a pioneering NLG 200 million
convertible bond that exhibited several unique features. Normally,
convertible bonds are built on the underlying asset of the issuing
company's shares. Rabobank's 'synthetic' convertible, in contrast, can be
converted at the end of maturity into a basket of 'top-five' Dutch shares
- which include Royal Dutch Shell, Akzo, Unilever, Philips and KLM.
An investor can choose between 'cash
settlement' or actual physical delivery of
the shares in the basket. The price of these
shares at the time of the bond's launch
was NLG 812. If their value increases
more than 20 percent - that is, beyond
NLG 980 - investors can cash in on the
rise. On the other hand, if their value does
not increase sufficiently, investors will
receive the nominal face value, or 100
percent of their initial investment. During
the 10-year life of the bond, they will
In February, Rabo Effectenbankjoined an
elite team of four banks making markets in
the entire basket of 34 top funds listed on
the Amsterdam Stock Exchange's new
ASSET trading system and combining the
stocks in the EOE and Midkap Indices.Other
players in Amsterdam's big league include
ABN Amro, ING and Mees Pierson.
meanwhile clip a coupon that pays 4.25
percent annually.
NETWORKED MARKETING
This flexibility has been made for an
interesting mix of buyers. About half the
issue was subscribed by retail investors,
(having been marketed through
Rabobank's branch network and through
other retail banking outlets). Abroad,
professional and institutional buyers
tended to come on board. As Raymond
Plischke, Head of Syndication at Rabo
Securities, explains: 'The instrument is
attractive to retail clients because they can
rely on its fixed value combined with a
coupon - which provides downside
protection - plus they get a chance to bet
on a long-term upside in stocks,'he
explains. 'For foreign investors, the vehicle
is attractive because it represents an
option to increase their exposure to the
Dutch market if circumstances eventually
permit.'
Coopers Lybrand has won the mandate
to devise a long-term information
technology business plan for the
International Division. It was one of three
short-listed companies that also induded
Computer Science Corporation and EDS. lts
plan will be presented to the ID/IT Steering
Committeeforconsideration in May.lf
approved, Coopers Lybrand will coordinate
the implementation of the Atlas, Devon,
MIS/Sybase and other IT projects.together
with Rabobank staff. In addition to helping
define overall business objectives and
program management, the consultants will
play the central coordinating role on such
important issues as organizational design,
systems architecture and staffing patterns.
Rabobank IT staff were in Paris in February
to conduct a Business Impact Analysis for the
Atlas and MIS/Sybase projects.This has now
been completed,and the results and formal
implementation decisions are expected in
March. Meanwhile, the first phase of a possible
Atlas implementation was inaugurated in
Antwerp.
A joint project has been launched by
Rabobank and KPMG:the Value-at-Risk
Infrastructure.This aims to define objectives
as well as establish systems and procedures
to help Rabobank meet requirements laid
down by the Basel Committee's Market Risk
and Capital Adequacy Directive. It will also
establish policies, procedures, and control
systems for Rabobank's internal Market Risk
Management Committee which can be
applied to the trading activities within the
Central Banking Sector.
The International Communications
Project (ICP) has been launched.The aim is
to optimize the entire Communications
infrastructure for the international network,
and will involve an outside service provider.
The project covers the dynamics of data
transfer, electronic mail, video and voice
Communications. ICP team members have
already visited the branches for their input,
and have toured the respective global
network centres run by SITA and lnfonet,two
of the short-listed service candidates.The
candidates are now drawing up proposals for
the ID/IT Steering Committee. A final
decision, and the start of project
implementation, is expected in this month.
The last Steering Committee meeting
considered a feasibility study concerning
Trade Atlas, the front-office trading system
for forex and money markets which has
already been implemented in Utrecht,
Singapore and London.The system has now
been approved for implementation
throughout the Rabobank network. A search
is underway for a project manager.
