Lehman to price commodities-linked notes; Barclays links two reverse convertibles to General Motors

By Sheri Kasprzak

New York, April 30 - Lehman Brothers Holdings, Inc. led structured products news to kick off the week with word that it will price buffered return enhanced notes linked to 10 commodities and two commodity indexes.

The notes are linked to light sweet crude oil with 15% weight, Henry Hub natural gas with 10% weight, reformulated gasoline blendstock for oxygen blending with 5% weight, No. 2 fuel heating oil with 5% weight, high-grade primary aluminum with 7% weight, grade A copper with 7% weight, primary nickel with 6% weight, standard high-grade zinc with 5% weight, standard lead with 5% weight, gold with 5% weight, the GSCI Livestock Excess Return Index with 10% weight and the GSCI Agriculture Excess Return Index with 20% weight.

Metals stand out

"Commodities, metals in particular, have just been incredibly strong this past month," said one market source. "Copper, gold are probably the strongest but others like zinc and aluminum have been performing well as well."

In fact, copper prices jumped 13% for the month of April. Copper edged up 2.4 cents to close at $3.5565 per pound on Monday.

Gold, which has also made some substantial climbs recently, put on $1.70 Monday after a volatile trading session to end at $683.50 per ounce. For the month of April, gold climbed 2.2%.

Even though oil prices were down for the month of April, reformulated gasoline prices jumped by nearly 19%. On Monday, prices were up 7.92 cents at $2.4405 per gallon. Oil prices, however, fell 76 cents on Monday to end at $65.71 per barrel. For the month of April, oil gave up 3%.

Terms of the Lehman notes

The commodities-linked notes pay par plus $1,000 times the basket return times an upside participation rate expected to be between 185% and 215%, to be determined at pricing, if the final basket level is greater than the initial basket level.

The notes pay par at maturity if the final basket level is equal to or less than the initial basket level but the 80% buffer level has not been breached.

If the final basket level is less than the buffer level, the notes pay par plus $1,000 times the basket return plus the 20% protection percentage.

GM gets popular at Barclays

Elsewhere in structured products, General Motors Corp. turned up as a reference stock for a couple of reverse convertibles being conducted by Barclays Bank plc this week.

On Monday, the investment bank announced the pricing of $4 million in 16.25% notes linked to the carmaker. Barclays also announced its plans to price 12% reverse convertibles linked to GM in May.

The 16.25% notes have a six-month term and pay par at maturity unless the stock drops below the 75% protection level during the life of the notes and ends below the initial share price of $31.56.

If that should happen, the notes pay a number of shares equal to $1,000 divided by the initial share price at maturity.

The 12% reverse convertibles also have a six-month term and the payout terms are roughly the same except that the protection level will be 65%.

The 12% notes are expected to price May 7.

Barclays to price AMR-linked notes

In other reverse convertibles news, Barclays said it intends to price 20% reverse convertibles linked to AMR Corp.

The six-month notes have an 85% protection level and pay par at maturity unless the stock falls below the protection level during the life of the notes and ends below the initial share price.

That notes will then pay a number of shares equal $1,000 divided by the initial share price.

The notes are set to price May 30.

Last week, Barclays priced $2 million in 17.15% reverse convertibles linked to AMR. Those notes also have a six-month term but have a 70% protection price.

Also last week, ABN Amro Bank NV priced $5.925 million in 20% Knock-In Reverse Exchangeable Securities linked to AMR's stock. Those notes also have a six-month term but have an 80% knock-in price.

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