Lehman to price 44.2% reverse exchangeables; Eksportfinans plans MSCI Taiwan index notes

By Sheri Kasprzak

New York, July 12 - Heading up structured products news on Thursday was an offering of 44.2% reverse exchangeable notes linked to InterOil Corp. from Lehman Brothers Holdings Inc.

The offering is one of several high-coupon structured products offerings linked to InterOil recently.

"The stock has had some serious volatility after it dropped last month," said one market insider. "The greater the volatility, the higher the coupon. Makes sense to me."

In June, the stock dove from the $43.94 level on June 25 to $18.94 on June 29. On June 26 alone, the stock gave up $13.61.

The company's stock traded between a low of $18.94 on June 29 and a high of $43.94 on June 25 during the month June and so far in July the stock has ranged between $24.11 on July 2 and $26.75 on July 5.

On Thursday, the stock gained 70 cents, or 2.78%, to close at $25.85 (Amex: IOC).

70% knock in level

The three-month notes pay par at maturity unless the stock falls below the 70% knock-in level during the life of the notes and finishes below the initial share price. If that should happen, the investors receive a number of shares equal to $1,000 divided by the initial share price.

The offering is set to price on July 26.

JPMorgan deal hits 67%

Earlier this month, on July 11, JPMorgan Chase & Co. priced a $1 million issue of reverse exchangeable notes linked to InterOil. Those notes have a huge 67% coupon.

The three-month notes pay par at maturity unless the stock falls by more than 40% during the life of the notes and finishes below the initial share price.

Should that occur, the notes pay a number of shares equal to $1,000 divided by the initial share price or, at the investment bank's option, the equivalent cash value.

Lehman, on June 29, just after the stock dove to its lowest level of $18.94 in June, Lehman Brothers announced plans to price a 30% offering of reverse exchangeable notes linked to InterOil

Those notes also have a three-month term and also pay par at maturity unless the stock falls below the 60% knock-in level during the life of the notes and finishes below the initial share price. If that should happen, the investors receive a number of shares equal to $1,000 divided by the initial share price at maturity.

Eksportfinans' Taiwan notes

Elsewhere in structured products news, Eksportfinans ASA announced plans to price enhanced participation notes linked to the MSCI Taiwan index through Goldman Sachs & Co.

If the final index level is equal to or greater than the index cap - expected to be 120% of the initial index level, the payout at maturity will equal the maximum redemption level, which is expected to be 140% of the face value of the notes.

If the final index level is equal to or greater than the initial index level and less than the index cap, the investors will receive the sum of the face amount and the face amount times the participation level - expected to be 200% - times the index return.

If the final index level is less than the initial level, the payout will be equal to the face amount times the final index level divided by the initial level.

Index performance

The MSCI Taiwan index ended at 259.50 on July 11. The index closed at 170.03 on July 17, 2006.

A month ago, the index closed at 205.22.

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