Lehman, RBC plan notes linked to metals; Merrill prices $56.5 million in Nikkei-linked notes

By Sheri Kasprzak

New York, June 6 - New offerings linked to metals are indicative of reviving investor interest in the commodities after recent drops, according to market sources Wednesday.

"A lot of metals went southward for a little while," said one market source. "They haven't quite rebounded yet but some are making a bit of a comeback. Copper is slowly moving back up and so is nickel."

Another market source agreed that activity in the commodities market did drift off for a while due to sinking metal prices.

Looking at the prices of aluminum, copper, nickel and zinc, over the past month, all have suffered substantial drops.

The price of aluminum was around $2,870 a month ago on May 9 and closed Wednesday at $2,712. Copper had traded around $8,200 on May 8 only to close at $7,559.50 on Wednesday. Nickel closed at $54,000 a month ago and closed at $48,400 on Wednesday. Zinc was trading at $4,125 on May 8 and closed on $3,690 on Wednesday.

Particular offerings

Royal Bank of Canada plans to price principal protected booster notes linked to a commodities basket that includes equal weights of copper, nickel, zinc and Brent crude oil.

The five-year notes pay par plus the principal amount times the basket coupon at maturity.

If the basket change is less than or equal to 0%, the coupon will be 0%. If the change is greater than 0% but less than 80% to 100%, the coupon will be 80% to 100%. If the change is greater than 80% to 100%, the coupon will be equal to the percentage change.

The notes are expected to price on June 29.

Lehman's offering

Lehman Brothers Holdings, Inc. plans to price 100% principal-protected base metals basket bonus notes linked to equal weights of copper, nickel, aluminum and zinc.

The two-year notes pay par at maturity plus the basket return.

If the return is greater than 15%, the investors receive par plus the basket return. If the return is less than 15% but greater than 0%, the investors receive par plus 15%. If the return is less than 15%, investors receive par.

The notes are set to price June 22.

Merrill prices $59.5 million notes

In other structured products news, Merrill Lynch & Co., Inc. priced $59.5 million in Accelerated Return Notes linked to the Nikkei 225 index.

The 14-month notes pay par plus triple the index return, assuming the final index level is greater than the initial level. The maximum payout is $12.685 per unit.

If the ending index level is less than the initial level, the payout will be based upon the percentage decrease.

Merrill also priced $35 million in Accelerated Return Notes linked to the Russell 2000 index.

Those notes pay par plus triple any gain on the index, up to $11.755 per unit.

If the final index level is less than the initial level, investors will receive a payment per unit based upon the decrease.

These notes also have a 14-month term.

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