Lehman banks on U.S. dollar; rubles rouse Goldman Sachs; bets made on homebuilders

By Evan Weinberger

New York, Oct. 11 - Currencies and homebuilders were the big rigs hauling structured products Thursday. It appears that investors think some downtrodden stocks and one downtrodden currency may be on the way back.

Most currency-linked baskets have been betting against the U.S. dollar recently. And with its struggles against everything from the euro to the pound to the loonie, why wouldn't they?

Is that about to change? At least one investment bank is offering a deal for customers that think so. Lehman Brothers Holdings Inc. priced $13.5 million of foreign exchange basket-linked notes due Oct. 13, 2009 linked to the performance of three currencies versus the U.S. dollar.

The underlying basket includes the euro with a 33.34% weight, the British pound sterling with a 33.33% weight and the Canadian dollar with a 33.33% weight.

The payout at maturity will be par plus 225% of any appreciation in the U.S. dollar versus the currency basket. If the U.S. dollar remains flat or depreciates relative to the basket, the payout will be par.

Lehman Brothers Inc. is the underwriter.

"There are a number of investors that are betting that the dollar will have a retracement after the recent sharp drop," one market watcher said.

Emerging market baskets bursting

With the euro trading ever upwards and the U.S. dollar attaining new lows seemingly every day, why not look at emerging market currencies? Add a creative structure, and JPMorgan Chase & Co. might just have an innovative deal. JPMorgan Chase plans to price knock-out return enhanced notes due Dec. 4, 2008 linked to the iShares MSCI Emerging Markets Index Fund.

The notes are expected to price Oct. 26 and settle Oct. 31.

If, during the life of the notes, the index closes at greater than 127.50% of its initial level, the payout at maturity will be a fixed return of 27.50%. The exact knock-out price and the exact knock-out rate will be determined at pricing.

If a knock-out event doesn't occur, the payout at maturity will be par plus double any index gain, subject to a maximum return that will be at least 55% and will be determined at pricing. If a knock-out event doesn't occur and the final level is equal to the initial level, investors will receive par. Investors will be fully exposed to any index decline.

J.P. Morgan Securities Inc. will be the agent.

Deutsche Bank AG, London Branch priced $4 million of zero-coupon principal-protected Asia rainbow notes due Oct. 15, 2009 linked to a basket of currencies.

The basket includes the Australian dollar, Indian rupee, Korean won, Malaysian ringgit and Philippine peso.

The weightings will be determined by the performance of each currency relative to the U.S. dollar: 40% for the highest performance, 30% for the second highest performance, 20% for the third highest performance and 10% for the fourth highest performance. The lowest performance will not be counted.

At maturity, investors will receive par plus 166% of any basket gain. Investors will receive at least par.

Deutsche Bank Securities and Deutsche Bank Trust Co. Americas are the underwriters.

Rubles rising?

Investing in a basket of BRICs is quickly becoming old hat, so some investors may want to focus on one currency. Plus, emerging markets don't always emerge at the same pace, or to the same heights.

"There have been a lot of BRIC deals up until now, this may signal that some investors think only some of the currencies will continue to appreciate, which is why they would rather buy single-currency-linked products to one or some of these currencies," a market player said.

Goldman, Sachs & Co. priced $5.77 million of zero-coupon binary notes due Oct. 16, 2008 linked to a ruble basket for issuer Eksportfinans ASA, according to a 424B3 filing with the Securities and Exchange Commission.

The basket consists of a 50% weight of the ruble against the dollar and a 50% weight of the ruble against the euro.

The payout at maturity will be 108% of par if the basket gains by 0.5% or more, otherwise the payout will be par.

Goldman, Sachs priced another $15.53 million of leveraged notes due Oct. 16, 2008 linked to a ruble basket for issuer Eksportfinans ASA.

This issue increases the deal size to $63.35 million.

The first tranche of the notes, for $47.82 million, priced on Oct. 1.

The basket consists of the exchange rate of the ruble against the dollar with a two-thirds weight and the exchange rate of the euro against the dollar with a one-third weight.

The payout at maturity will be 107.9% of par plus 250% of any gain on the basket. Investors will receive at least par.

Housing bets going up

While there has been much doom and gloom in recent months hanging over the housing sector, several financial institutions appear to be offering the chance to bet on a rally in at least two homebuilders' stocks.

Lehman Brothers priced a $1.65 million issue of 19% annualized reverse exchangeable notes due April 15, 2008 linked to the common stock of Toll Brothers, Inc., according to a 424B2 filing with the Securities and Exchange Commission.

Interest will be payable monthly.

Payout at maturity will be par unless Toll Brothers stock falls below the knock-in price of $13.638 - 60% of the initial value - during the life of the notes and finishes below its initial price of $22.73, in which case the payout will be a number of Toll Brothers shares equal to $1,000 divided by the initial share price.

Lehman Brothers is the agent.

Barclays Bank plc priced $3 million of 19.1% reverse convertible notes due April 14, 2008 linked to Toll Brothers stock, according to a 424B2 filing with the Securities and Exchange Commission.

Payout at maturity will be par in cash unless Toll Brothers stock falls below the protection price of $15.91, 70% of the initial price of $22.73, during the life of the notes and finishes below the initial price in which case the payout will be 43.994721 shares of Toll Brothers stock.

Barclays Capital is the agent.

JPMorgan Chase priced $882,000 of 17.5% reverse exchangeable notes due Jan. 11, 2008 linked to Toll Brothers common stock, according to a 424B2 filing with the Securities and Exchange Commission.

Interest will be payable monthly.

If Toll Brothers stock falls below 70% of the initial share price during the life of the notes and finishes below the initial share price, the payout will be a number of Toll Brothers shares equal to $1,000 divided by the initial share price.

Otherwise, the payout will be par.

J.P. Morgan Securities Inc. is the agent.

Lehman Brothers priced a $1.5 million issue of 19.25% reverse exchangeable notes due Oct. 12, 2008 linked to the common stock of D.R. Horton, Inc., according to a 424B2 filing with the Securities and Exchange Commission.

Interest is payable monthly.

The payout at maturity will be par unless the stock falls by more than 40% during the life of the notes and finishes below the initial share price, in which case the payout will be a number of D.R. Horton shares equal to $1,000 divided by the initial share price or, at the bank's option, the equivalent cash value.

Lehman Brothers Inc. is the underwriter.

JPMorgan Chase plans to price an issue of 18% reverse exchangeable notes due Oct. 31, 2008 linked to the common stock of D.R. Horton, according to an FWP filing with the Securities and Exchange Commission.

Interest will be payable monthly.

The payout at maturity will be par unless D.R. Horton stock falls below the knock-in price - 60% of the initial share price - during the life of the notes and finishes below the initial share price, in which case the payout will be a number of D.R. Horton shares equal to $1,000 divided by the initial share price or, at JPMorgan's option, the equivalent cash value.

The notes will price on Oct. 26 and settle on Oct. 31.

J.P. Morgan Securities Inc. will be the agent.

Financials also in play

Financials have also been hit hard in the credit crunch, and there's hope they may be ready for a comeback in the halls of Societe Generale. Societe Generale, New York Branch plans to price 14% ReConvs due April 30, 2008 linked to Ambac Financial Group, Inc. common stock, according to a term sheet.

Societe Generale will issue up to $10 million of the securities.

Interest will be payable monthly.

At maturity, investors will receive par unless Ambac stock falls below the knock-in price - 75% of the initial share price - during the life of the notes and finishes below the initial share price, in which case the payout will be a number of Ambac shares equal to par divided by the initial share price.

The notes will price on Oct. 26 and settle on Oct. 31.

Societe Generale is lead agent with Countrywide Securities Corp. as co-agent.

Societe Generale, New York Branch plans to price 15.8% ReConvs due Jan. 31, 2008 linked to MBIA Inc. common stock, according to a term sheet.

Societe Generale will issue up to $10 million of the securities.

Interest will be payable monthly.

At maturity, investors will receive par unless MBIA stock falls below the knock-in price - 80% of the initial share price - during the life of the notes and finishes below the initial share price, in which case the payout will be a number of MBIA shares equal to par divided by the initial share price.

The notes will price on Oct. 26 and settle on Oct. 31.

Societe Generale is lead agent with Countrywide Securities Corp. as co-agent.

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