JPMorgan to price two notes linked to iShares MSCI Emerging Markets fund

By Sheri Kasprzak

New York, Nov. 1 - JPMorgan Chase & Co.'s two offering of knock-out return enhanced notes linked to the iShares MSCI Emerging Markets index fund are indicative of the underlying fund's popularity, said one market insider.

"I don't see anything unusual about that," said the market source when asked if planning two separate offerings of the same type was odd.

"I think it's just an indication of their popularity. I think the iShares notes are really a good investment. The payout is attractive."

In other news, Lehman Brothers Holdings, Inc. priced $2.9 million in buffered principal at risk notes linked to four Asian indexes.

The notes are linked to equal weights of the MSCI Singapore Free, MSCI Taiwan, Nikkei 225 and Kospi 200 indexes.

Terms of JPMorgan's iShares notes

In the JPMorgan iShares deals, one of the zero-coupon notes pays twice the appreciation of the index fund up to a maximum return of 73% at maturity, assuming a knock-out event does not occur. A knock-out event will occur if, on any trading day during the monitoring period, the closing price of one share of the index fund is greater than the knock-out price, which is equal to at least 136.5% of the initial share price.

If a knock-out event does occur, investors will receive par plus the principal amount times 36.5%.

Investors will lose 1% of their principal for every 1% the final share price declines from the initial share price.

The notes are set to price Nov. 2.

The other notes also pay twice the appreciation of the index fund, up to the maximum total return on the notes of 62% at maturity, assuming no knock-out event. A knock-out event on these notes occurs when the closing price of one share of the index fund is greater than the knock-out price, in this case at least 131% of the initial price.

If no knock-out event occurs the notes pay par times double the share return, subject to a cap of 62%.

The notes are set to price Nov. 7.

JPMorgan negotiated another offering of knock-out return enhanced notes linked to the iShares MSCI Emerging Markets index fund earlier this month.

If the index closes at greater than 127.5% of its initial level, the payout will be a fixed return of 27.5%. The exact knock-out price and the knock-out rate will be determined at pricing.

If a knock-out even doesn't occur, the payout will be par plus double any index gain, subject to a maximum return of at least 55%, which will be determined at price.

In July, JPMorgan priced $4.327 million in zero-coupon knock-out notes linked to the index fund.

If the shares of the index fund close above the knock-out level on any monitoring day, the notes will be called and investors will receive $1,325 per $1,000 principal amount of notes. The knock-out level is $185.47, 132.5% of the initial share price, and monitoring days are the 20th day of each month.

If the notes are not called, the payout at maturity is par plus double any share price gain. Investors are fully exposed to any decline in the share price.

Lehman prices notes linked to Asian indexes

In other news, an offering of $2.9 million in notes linked to equal weights of four Asian indexes were priced by Lehman Brothers.

The three-year notes, if the basket return is positive, investors will receive par plus the principal amount times the basket return times the 100% participation rate.

If the basket return is negative or zero, but its absolute value does not exceed the 15% buffer amount. If the basket return is negative and its absolute value exceeds the buffer amount, the investors will be exposed to any decline in the basket beyond the buffer amount.

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