Morgan Stanley (MS:US) sold $110 million of 15-year auto-callable notes tied to the Standard & Poor’s 500 Index, the bank’s biggest offering since August 2011.
The securities, issued Jan. 15, yield 7 percent annually for the first five years before increasing twice more to pay 12 percent for the last five years so long as the benchmark doesn’t fall below 70 percent of its initial value, according to a prospectus filed with the U.S. Securities and Exchange Commission.
The bank automatically redeems the notes quarterly after five years, if the index has risen above its starting level. Investors receive their principal at maturity so long as the benchmark doesn’t drop by more than 50 percent. The New York- based bank distributed the securities for a 3.5 percent fee.
U.S. investors bought $10.2 billion of notes linked to the S&P 500 last year, the most in at least three years, according to data compiled by Bloomberg. The index rose 13.2 percent during the 12 months ending Jan. 18.
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