Lehman to price copper- and zinc-linked notes; Svensk prices $250 million in Elements

By Sheri Kasprzak

New York, Aug. 1 - Lehman Brothers Holdings Inc. kicked off the month of August with a planned offering of principal-protected enhanced participation notes linked to equal weights of copper and zinc.

"Copper, for one, has really made some gains over the past two weeks or so," said one market insider on Wednesday. "Zinc is performing somewhat better than it was last month. I wouldn't say as well as copper but in a basket, I think this makes sense."

Another source said Wednesday that zinc and copper have appeared in baskets of other commodities before but it was interesting to see those metals in a basket alone.

"Most of the time, you're looking for more diversification in a commodities basket," he said.

On Wednesday, copper prices closed at $3.66 per pound. Copper prices were trading at around $3.50 per pound at the beginning of July.

Zinc closed at $1.607 per pound on Wednesday. A month before, zinc prices were trading at around $1.618 per pound.

125% participation rate

The two-year notes pay par plus the principal amount times the basket return times the participation rate, which is expected to be 125%, assuming the basket return is greater than zero.

If the basket return is less than zero, investors will receive par at maturity.

Svensk prices Elements

In other news, AB Svensk Exportkredit priced $250 million in Elements linked to the Spectrum Large Cap U.S. Sector Momentum Index.

The 15-year notes pay cash equal to par times the index factor on the final valuation date times the investor fee. The index factor is equal to the closing value of the index on that day divided by the initial index level.

The investor fee is calculated daily and is equal to 0.75% divided by 365 per day.

The index, which was developed by BNP Paribas, tracks the value of a notional portfolio composed of the 10 sub-indexes of the S&P 500 index. The level of the index is based on the relative weights of the sub-indexes within the index.

Similar to iPath notes

Recently, Svensk announced plans to price two Elements linked to Rogers International Commodity indexes.

On July 27, Goldman Sachs & Co. priced a further $20 million of its 30-year GS Connect S&P GSCI Enhanced Commodity Total Return Strategy Index Exchange-Traded Notes, bringing the total to $84,225,600.

Both sets of notes are similar to Barclays Bank plc's iPath Exchange Traded Notes.

"Transparency is a big selling point," said one market source Wednesday of the notes. "Investors are very interested in ETNs and I think almost everyone agrees that they're a great investment."

Analyst Tim Mortimer of Future Value Consultants said earlier this week that "all ETNs are really attractive," and give investors exposure to areas they may not otherwise have access to.

Payout on the Goldman notes is calculated by multiplying the face amount of the notes by the index factor, which is determined by dividing the closing level of the index on that day by the initial index level of 693.3813, minus the investor fees.

The fees are calculated daily on a 1.25% yearly rate times the face amount of the notes times the index factor.

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