Merrill Lynch prices $35 million notes linked to Industrial 15, $12.97 million notes linked to CMT

By Sheri Kasprzak

New York, Feb. 2 - Merrill Lynch & Co., Inc. rounded out the week in structured products with a $35 million note offering linked to the Industrial 15 index and a $12.974 million offering of notes linked to the two-year Constant Maturity Treasury rate.

The strategic return notes linked to the Industrial 15 index pay the return on the underlying index, reduced by 1.5% per year and multiplied by 99%. Investors may exchange their notes before maturity during a period in February between 2008 and 2011.

The index represents the 15 highest dividend-yielding qualifying stocks in the S&P Industrial Index.

Merrill's CMT notes

Elsewhere at Merrill, the investment bank priced $12.974 million in principal-protected callable notes linked to the two-year Constant Maturity Treasury rate.

The three-year notes are automatically callable if the two-year CMT rate has dropped from its initial level of 4.765 by at least 22 basis points on any observation date. The observation dates will be the fifth business days preceding any six-month anniversary of the issue date.

The redemption amount will be $1,040 on the first observation date, and it will increase by $40 on every subsequent observation date.

If the notes have not been redeemed, payout at maturity will be par.

Lehman Brothers Holdings, Inc. priced another interest-rate offering earlier this week, selling $200 million in Curve Trade Notes linked to the Constant Maturity Swap rate.

In a bet on a steepening yield curve, the 10-year notes pay 6% annually until Aug. 5, 2007 when the interest rate will be reset quarterly and will equal 2.51% plus 8 multiplied by the spread of the 10-year CMS over the two-year rate.

Barclays prices Whole Foods notes

In other structured products news, Barclays Bank plc is gearing up to price 11.05% reverse convertibles linked to Whole Foods Market, Inc.

Whole Foods has been a popular reference stock for reverse convertibles, but the offering comes on the heels of an upside offering linked to the stock by Lehman.

In the six-month Barclays notes, investors will receive par unless Whole Foods' stock falls below the 80% knock-in level during the life of the notes and finishes below the initial share price. If those things occur, payout will be a number of Whole Foods' shares equal to $1,000 divided by the initial share price.

The notes are set to price Feb. 9.

Lehman's Whole Foods notes

On Thursday, Lehman priced $38.3 million in 1.25% notes linked to the stock of Whole Foods.

Those seven-year notes pay par plus the return on the stock if Whole Foods' share price exceeds the threshold value of 118% of the average execution price per share on Feb. 3, 2014, the final valuation date. Payout may be in stock or cash at Lehman's option.

Otherwise, investors will receive par.

The note offering includes a $5.745 million greenshoe and the notes are callable beginning Jan. 30, 2010.

In January, Whole Foods' stock traded between $42.51 and $46.99 (Nasdaq: WFMI). On Thursday, the company's stock gained 78 cents to settle at $43.97.

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