Lehman prices $10 million notes linked to emerging markets basket; Citigroup prices Starbucks ELKS

By Sheri Kasprzak

New York, Feb. 27 - Lehman Brothers Holdings Inc. headed up structured products news Tuesday, pricing $10 million in digital notes linked to an emerging markets currency basket.

The EM High Yield Digital Plus Basket II notes are linked to long positions in the Brazilian real with a 30% weight, the Hungarian forint with a 20% weight, the Indonesian rupiah with a 20% weight, the Mexican peso with a 15% weight, the Indian rupee with a 10% weight and the Turkish lira with a 5% weight, all versus 100% negative weighing short position in the dollar.

One market source said he feels emerging markets are still of great interest to investors.

"There has been some speculation that EM are probably going to taper off at some point this year but I really find that hard to believe," he said.

"We've seen a lot of interest in these types of notes. As for the currencies themselves, the real is a particularly strong one. The others have popped up here and there as well."

Recently, Barclays Bank plc sold $4 million in zero-coupon 100% principal-protected bear notes linked to basket that included, among other currencies, the Brazilian real and the Indian rupee.

Looking forward, Eksportfinans ASA intends to price 0% notes linked to equal weights of the Brazilian real, Australian dollar, Canadian dollar, Chinese renminbi, Singapore dollar and South Korean won measured against the dollar.

Terms of the offering

The one-year Lehman notes pay par at maturity if the final basket level is lower than the initial basket. If the final basket level increases by up to 12%, payout will be par plus 13.3%. If the final basket level increases by 12% or more, the payout will be par plus 13.3% and 1.5% for every 1% the basket increases beyond the trigger level.

Citigroup's Starbucks-linked ELKS

Elsewhere in structured products news, Citigroup Funding Inc. priced $94.1 million in 8% Equity LinKed Securities linked to Starbucks Corp.

The one-year notes pay par of $10 in cash at maturity unless the stock closes at or below $25.58, 77.5% of the initial share price, during the life of the ELKS. In that case, payout will be 0.30294 shares of Starbucks in cash or stock at the holder's option.

In a similar offering, Citigroup priced $55.75 million in 12% ELKS linked to Celgene Corp.

Those one-year notes pay par of $10 in cash unless the share price closes at or below $28.84, or 72.5% of the initial share price, during the life of the ELKS. In that case, payout will be 0.18225 shares of Celgene in cash or stock.

UBS's S&P-linked notes

Finally, UBS AG priced $58 million in 0% return optimization securities linked to the S&P 500 index.

The 18-month notes pay par of $10 at maturity plus triple any gain on the index, capped at 16%. Investors are exposed to any declines.

The deal was by a substantial margin the largest of a group priced by UBS using a similar structure and linked to a range of indexes.

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