Lehman to price FX Multi-Range notes linked to pound/dollar exchange rate

By Sheri Kasprzak

New York, March 1 - Lehman Brothers Holdings Inc. kicked off the month in structured products with a planned offering of Foreign Exchange Multi-Range Notes linked to the British pound/dollar spot exchange rate.

"The GBP/USD multi-range notes offer an investor two chances to receive a coupon of between 5% and 7% - approximately 10% to 14% annualized determined on [the] trade date - if GBP/USD remains somewhat range bound," said a source at Lehman.

"If GBP/USD does not remain range-bound and breaks through either side of the initial range (set on the trade date), then the investor receives a second opportunity to receive the same coupon, providing the GBP/USD exchange rate remains within the new range, which is set at the time the first range is broken.

"This allows the investor to benefit should the market trend briefly before entering a new range - either higher or lower."

Deal terms

The payout at maturity on the notes will be par plus an additional amount if the spot exchange rate remains within the initial range or if it trades below the lower barrier and then remains within a high range. The initial range will be the exchange rate on the settlement date plus 0.04 to minus 0.06. The lower barrier is the exchange rate on the settlement date plus 0.04 and the new low range is 0.05 either side of the lower barrier.

The upper barrier is the exchange rate on the settlement date minus 0.06 and the new high range is 0.05 either side of the upper barrier.

The additional amount is expected to be 5% to 7%.

If the tests are not met, investors receive par at maturity.

BRIC basket strong even after market drop

Even though some emerging market currencies have given up recent gains because of the massive stock market dive earlier this week, all may not be lost for emerging market offerings.

A market source at Lehman Brothers said Thursday that the Brazil, Russia, India and China basket remains strong.

"In the past few days, EM currencies have certainly given back a good portion of recent gains but, for example, the BRIC basket remains stronger against the dollar than at the start of 2007," he said. "In addition, FX volatility is up, which partially offsets currency losses in those notes that are principal protected."

Goldman prices $104 million Taiwan notes

And speaking of emerging markets activity, Goldman Sachs & Co. priced $88.718 million in 0% notes linked to the Goldman Sachs Taiwan Select index for Eksportfinans ASA.

The notes pay par at maturity plus any positive or negative return on the index.

The return will be determined using the average of the index closing levels on Feb. 26, 2009 and Feb. 27, 2009.

Goldman also brought a $15.221 million issue of enhanced participation notes linked to the MSCI Taiwan index.

The payout at maturity will be par plus any double any gain on the index, subject to a maximum return of 41.6%. If the index declines, investors will participate in any losses.

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