Lehman prices $12 million in notes linked to 'interesting' stock index basket

By Sheri Kasprzak

New York, Nov. 13 - Lehman Brothers Holding, Inc. priced what one market source said is an "interesting" deal because it is linked to a fairly uncommon index.

Lehman priced $12 million in partially principal-protected notes linked to a basket of indexes that included the CECE Composite index.

"It looks pretty standard to me except for the CECE," said one market insider. "If that component was gone, I would say this is a pretty standard basket but I don't think I've ever seen anything linked to the CECE before. That's pretty interesting."

The CECE composite index tracks the performance of stocks in Central, Eastern and Southern Europe.

The 52-month notes are linked to the Dow Jones Euro Stoxx 50, the Nikkei 225, the FTSE 100, the CECE composite, the Swiss Market and the S&P/ASX 200 indexes.

Stoxx makes up the majority of the basket with 40%. The Nikkei makes up 20% of the basket and the FTSE 100 makes up 15%. The CECE Composite index comprises 10% of the basket, the Swiss Market index 7.5% and the S&P/ASX 200 7.5%.

If the basket return is positive, the investors will receive par plus the principal amount times the basket return times the 146.3% participation rate. If the basket value does not fall below 20% of its initial value at maturity, the investors will receive par. If the basket value slips beyond the buffer, the investors will lose 1% for every 1% the value falls below the buffer.

The notes are being sold through UBS Financial Services.

JPMorgan's latest iShares notes

In other news, JPMorgan Chase & Co. priced another offering of knock-out return enhanced notes linked to the iShares MSCI Emerging Markets index fund - this time for $10 million.

The one-year notes pay par plus the 37.25% knock-out rate, assuming a knock-out event occurs. A knock-out event will occur if the closing price of one share of the index fund is greater than the knock-out price, 137.25% of the initial price.

If a knock-out event has not occurred and the final share price is greater than the initial price, investors will receive a cash payment of par plus double the return on the fund, subject to a maximum total return on the notes of 74.5%. If the share return is equal to 37.25%, the investors will receive the maximum total return of 74.5%.

If a knock-out event has not occurred and the final share price is equal to the initial share price, investors receive par at maturity.

If a knock-out event has not occurred and the final share price is less than the initial share price, the investors will be exposed to any declines.

Earlier this month, JPMorgan priced $1 million in similar notes.

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