Master limited partnerships, the exchange-listed entities common among oil and gas players, are being scoped by Street desks as potential underlying for structured notes. No deals have yet been formulated but lawyers say the area is drawing a lot of interest because MLPs are transparent, listed on exchanges and have the tax advantages of being partnerships.
The hurdle is that lawyers are still puzzling out how to weave the associated tax benefits into a structured note. "We are seeing a lot of interest in this," said a lawyer at a New York firm. Another estimated such a structure could be launched in the near future, declining to specify if this would be weeks or months.
Lawyers said derivative structurers have been sniffing around the partnerships to see if they can be wrapped into a structured note form and leveraged or coupled with capital protection. This has been done with other investment structures such as mutual and hedge funds, exchange-traded funds and venture capital trusts. "It would be another asset class for investors," explained the lawyer, who declined to name the interested dealers.
