REX: How is Payment or Delivery at Maturity Calculated?

At maturity, investors in Reverse Exchangeable Securities will receive either a cash payment equal to the original principal amount of the securities or the stock redemption amount.

The type of payment at maturity will be determined by comparing the closing price of the underlying stock on a specifi ed determination date to the closing price of the underlying stock on the date the securities were priced.

If the closing price of the underlying stock on the determination date is at or above the closing price of the underlying stock on the date the securities were priced, the payment at maturity will be a cash payment equal to the principal amount.

If the closing price of the underlying stock on the determination date is below the closing price of the underlying stock on the date the securities were priced, the investors will receive the stock redemption amount.

The Stock Redemption Amount
The stock redemption amount is a number of shares of the underlying stock equal to the principal amount per security divided by the closing price of the underlying stock on the date the securities were priced.*

The stock redemption amount is delivered in shares, and the value of those shares will not be finally determined until the investor sells them. If the investor sells them on the determination date, the value will equal the stock redemption amount times the closing price of the underlying stock on such date. This amount will be less than the principal amount of the securities, perhaps significantly.

The closing price of the underlying stock on the determination date may be substantially lower than the closing price of the underlying stock on the date the securities were priced, and could be zero. Accordingly, investors may lose some or all of their initial principal investment in the securities.
* No fractional shares will be delivered at maturity. Instead, a cash amount equal to the number of fractional shares times the closing price of the underlying stock on the determination date will be paid along with delivery of the shares of the underlying stock.