Lehman to price capped inverse return leveraged notes linked to iShares Dow Jones U.S. Real Estate

By Jennifer Chiou

New York, Jan. 22 - Lehman Brothers Holdings Inc. plans to price an issue of capped inverse return leveraged notes due Feb. 6, 2009 linked to the iShares Dow Jones U.S. Real Estate index fund, according to an FWP filing with the Securities and Exchange Commission.

If the index fund reaches the knock-out level of 200% of the initial price during the life of the notes, the notes will automatically be called for a cash payment of par minus an amount equal to par multiplied by the share return on the day following the knock-out event minus 15%.

Payout at maturity will be par plus the leverage factor - which will be at least 200% and will be determined at pricing - multiplied by the absolute value of index fund return if the final price is below the initial price. The return will be capped at 40%.

Investors will shares in losses determined according to the gain on the index fund beyond the 15% threshold.

The notes are expected to price on Feb. 1 and settle on Feb. 6.

Lehman Brothers Inc. will be the underwriter.

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