Lehman Brothers plans three-year auto-callable CMS steepener notes

By Laura Lutz

Des Moines, Oct. 15 - Lehman Brothers Holdings Inc. plans to price auto-callable steepener notes due Nov. 1, 2010, according to an FWP filing with the Securities and Exchange Commission.

The notes will be automatically called at increasing premiums if the spread of the 10-year constant maturity swap (CMS) rate over the two-year CMS rate is at least an early redemption threshold on any of six semi-annual observation dates.

The early redemption threshold is expected to be between 1.2% and 1.4%. The exact threshold will be set at pricing.

The redemption amount will be 107.5% if the notes are called on April 25, 2008, 115% on Oct. 27, 2008, 122.5% on April 27, 2009, 130% on Oct. 26, 2009, 137.5% on April 26, 2010 and 145% on Oct. 25.

If the notes are not called early, the payout at maturity will be 106% of par.

The notes are expected to price on Nov. 1.

Lehman Brothers Inc. is the underwriter.

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