Lehman to price notes linked to International Game: ABN Amro prices Energy Partners-linked notes

By Sheri Kasprzak

New York, March 23 - Lehman Brothers Holdings Inc. led structured products news to close out the week announcing its plans to price $10 million in 1% performance-linked notes linked to the stock of International Game Technology.

Meanwhile, ABN Amro Bank NV priced a $1 million offering of Knock-in Reverse Exchangeable Securities linked to Energy Partners, Ltd. with a 30% coupon. The coupon is rather large and contradicts a market source's earlier assertion that coupons may be getting smaller in the coming weeks.

"I don't think there's any evidence that coupons will get smaller," said another market source, an equity structurer based out of New York. "The coupons are really dependent upon the particular reference stock and, to a lesser degree, the sector."

On Friday, International Game's stock gained 53 cents to settle at $40.95 (NYSE: IGT). So far this month, the stock has traded between $38.52 and $40.96.

Lehman's notes

Moving back to the Lehman Brothers offering linked to International Game, the senior notes have a seven-year term and an exchange premium of 112.04% of the price Lehman will pay to hedge the notes.

The notes have a cash or stock payout at maturity and can be converted at any time at the investor's option.

The notes are set to settle March 29 and include a $1.5 million over-allotment option.

ABN Amro's $1 million notes

The 30% ABN Amro notes linked to Energy Partners come as oil prices continued their climb on Friday. Oil prices ended the session Friday up 59 cents at $62.28 per barrel after jumping more than $2.00 per barrel on Thursday.

The three-month notes pay par at maturity unless the stock falls below the knock-in level of $12.55 during the life of the notes and finishes below the $17.93 initial share price. In that case, the notes pay a number of shares equal to $1,00 divided by the initial share price.

Energy Partners' stock remained unmoved at $18.00 on Friday. Throughout the month of March, the stock has traded between $19.96 and $17.27, leading one market source Friday to comment that the stock has become more range-bound in the past couple of weeks. Since March 12, the stock has traded between $17.27 and $18.00 (NYSE: Energy Partners).

"I'm not saying there are going to be all these reverse convertibles linked to it but it does make for an interesting reference stock in that the price is trading in a range right now," the market source added.

Some market participants had recently said that the recovery in the stock market from its recent plunge would lead to smaller coupons on reverse convertible deals. In particular, equities rose strongly on Wednesday after the Federal Open Market Committee meeting.

There was also concern about firms being stuck with deals that have far coupons when the volatility has come in on the stock.

PHLX Housing Sector notes

Finally, Morgan Stanley announced Friday that it intends to price zero-coupon protected absolute return barrier notes linked to the PHLX Housing Sector Index.

The offering comes on the heels of news that home sales jumped by the largest amount in three years.

The notes pay par at maturity plus a supplemental amount equal if the value of the index falls within the index range during an observation period.

The range will be a value greater than the initial value time 74% to 76% and less than the initial value times 124% to 126%, with the actual percentages to be determined at pricing.

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