A case study on Keppel guaranteed notes series 1.

Abstract

In November 2006, Keppel Corporation Limited issued Keppel Guaranteed Notes Series 1 under its wholly-owned subsidiary, Keppel Structured Notes Pte. Limited. This one-of-a-kind structured notes had coupon payments conditional upon the price performance of six commodities.

Our case looks into the customized features of this financial instrument including swap arrangements entered into with Société Générale. In our analysis, we examine the possible reasons behind Keppel Corporation Limited’s decision to issue commodity-linked structured notes and how terms of the structured notes were determined. We also take on the perspective of individual parties (Keppel Corporation Limited, the Investors and Société Générale) to put forth an analysis of specific benefits and costs that accompanied the issuance, while considering the impact of prevailing economic conditions. We conclude by providing recommendations as to whether a second issuance would bring benefits and gains to Keppel Corporation Limited, as well as whether a demand for similar structured notes would be present in the near future.