JPMorgan sells 25% reverse convertibles linked to Dendreon; Lehman to price to FX notes

By Sheri Kasprzak

New York, May 17 - JPMorgan Chase & Co. led structured products news on Thursday with a $1.535 million 25% reverse exchangeable note linked to Dendreon Corp.

The notes come at a time when Dendreon's stock has been seesawing wildly.

"There is a greater risk associated with a stock like this," said one market source, referring to the jumps and dips in the stock. "At any time, you could fall below that trigger. For the risk though, the coupon's not bad."

So far this month, Dendreon's stock has traded between $5.54 and $19.39 with the lowest closing stock price coming on May 10 and the highest on May 4. In April, the stock traded between $12.93 and $23.58, following on the heels of a March when the stock traded between $3.70 and $5.22.

Payout terms

The six-month notes pay par at maturity, plus the coupon, unless the stock falls below a 50% trigger level during the life of the notes and closes below the initial share price.

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

The final terms had a bigger coupon and a lower trigger even than announced late Wednesday JPMorgan had previously said it anticipated a 20% payment and a 60% trigger.

Lehman's FX notes

Elsewhere in structured products news Thursday, Lehman Brothers Holdings, Inc. announced plans to price two foreign exchange offerings - one linked to a European currency basket and the other to an Asian currency basket. In each case there is both upside leverage and a guaranteed payout if the basket declines.

In the European offering, the zero-coupon, 18-month notes are linked to a basket that includes equal weights of the Swedish knrona, the Norwegian krone, the Russian ruble and the Hungarian forint. In the basket, the European currencies take a long position against the U.S. dollar's short position.

If the basket performance is greater than zero on the valuation date, the investors will receive par times the product of the leverage percentage - expected to be 125% to 130% -- and the basket appreciation.

If the basket performance is less than zero, the investors receive par plus the principal amount times 3%.

Currency performance

Each of the currencies in the basket has improved over the course of the past two years against the U.S. dollar.

Between March 1 and May 13, the Swedish krona has ranged between SEK 0.141 against the U.S. dollar and SEK 0.15 against the U.S. dollar.

For the same time period, the Norwegian krone ranged between NOK 0.162 for every U.S. dollar and NOK 0.168 per U.S. dollar.

Between March and May, the ruble ranged between RUB 0.0382 and RUB 0.0387 against the U.S. dollar.

Finally, the forint has ranged between HUF 0.0052 and HUF 0.0057 against the U.S. dollar between March 1 and May 13.

Asian offering

Looking to the Lehman notes linked to the Asian basket, most of the terms are the same as the European basket.

The notes are linked to equal weights of the Malaysian ringgit, the Indonesian rupiah, the Singapore dollar and the Chinese renminbi.

The zero-coupon, 18-month notes pay par times the product of the leverage percentage - in this case expected to be 115% to 120% - and the basket appreciation, assuming the basket performance is greater than zero on the valuation date.

The notes pay par plus the principal amount times 3% if the basket performance is less than zero on the valuation date.

Performance of currencies

The notes take a long position in the Asian currencies and a short position in the U.S. dollar.

Looking at the performances between March and May of this year, the ringgit ranged between MYR 0.285 and MYR 0.33 against the U.S. dollar.

The Singapore dollar traded between SGD 0.55 and SGD 0.66 against the U.S. dollar and the rupiah between IDR 0.000109 and IDR 0.000113 for the time period.

The renminbi ranged between CNY 0.129 and CNY 0.133 against the dollar between March 1 and May 13.

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