Lehman prices $150 million in notes linked to Baker Hughes; more Asian-linked notes priced

By Sheri Kasprzak

New York, Feb. 22 - Heading up activity in structured products Thursday was a $150,082,249 offering of Yield Enhanced Equity Linked Debt Securities from Lehman Brothers Holdings Inc. linked to Baker Hughes Inc.

News of the Yeelds comes just days after Baker Hughes announced that profits rose less than expected in the fourth quarter. The company reported a net income for the fourth quarter of $326.2 million, or $1.02 per share, up from $257.9 million, or 75 cents per share, in the corresponding quarter of the previous year.

The 13-month 8% Yeelds pay the value of one share of Baker Hughes stock, capped at $74.7134, or 114% of the initial value - $65.5381 - that Lehman paid to hedge the transaction. The payout will be in either stock or cash.

On Thursday, the oil services company's stock gained 99 cents, or 1.53%, to settle at $65.54 (NYSE: BHI).

Morgan Stanley's Asian currency notes

Looking to currency offerings, Morgan Stanley is negotiating the terms of 0% capital-protected notes linked to several Asian currencies.

The offering comes as Asian currencies and indexes have gained in popularity recently.

"We're seeing a lot of Asia-related deals coming through," said one distributor when asked about the popularity of Asian deals recently. "It's not necessarily emerging markets countries anymore but there are certainly a number of those as well. I don't think it has much to do with emerging markets but a lot of Asian currencies just happen to be faring pretty well right now and investors want to cash in on that."

Still another market source said he feels emerging markets will continue to be strong this year.

"I don't think we'll be seeing fewer [emerging markets] deals this year than last," he said. "There still is some interest from what we're seeing anyway."

The Morgan Stanley notes are linked to equal weights of the Chinese renminbi, the Indian rupee, the Korean won and the Taiwan dollar.

Deal terms

The notes, which are set to price in March, will pay par plus any gain on the basket multiplied by the participation rate - expected to be 130% to 140%. The exact rate will be determined at pricing. Investors can expect to receive at least par.

Deutsche plans Hang Seng-linked deal

Related to the Asian offerings craze, Deutsche Bank AG, London Branch is working on 0% performance securities linked to the Hang Seng China Enterprises index.

The notes are set to price Friday and will pay par of $10.00 plus 149% of any gain on the index. Investors will share in any decline in the index.

Earlier this month, Citigroup Funding Inc. priced $5.8 million in notes linked to the Hang Seng China Enterprises index. Those five-year notes pay par plus the index return times 133%. Payout will be par if the index drops by less than 30% and if the index drops by more than 30%, investors receive par times the index return.

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