Lehman ties return-optimization securities to GE, Exxon Mobil; Svensk prices grain-linked product

By Kenneth Lim

Boston, Feb. 13 - Lehman Brothers Holdings Inc. priced two series of return-optimization securities notable for being linked to individual stocks instead of indexes.

"These are basically accelerated-return notes that give you more participation on the upside but at the risk of potentially losing your principal," a structurer said.

Lehman's return-optimization securities return par plus some number of times the gain in the underlying, but holders of the notes have full participation in any decline below the protection level.

Lehman on Tuesday priced $3.81 million of 0% return optimization securities due Aug. 13, 2009 linked to the common stock of General Electric Co. The payout at maturity will be par of $10 plus double any share price gain, subject to a maximum return of 28.85%. Investors will receive par if the share price declines by 10% or less and will lose 1% for each 1% share price decline beyond 10%.

The bank also priced $2.03 million of 0% return optimization securities with partial protection due Aug. 13, 2009 linked to the common stock of Exxon Mobil Corp. The payout at maturity will also be par of $10 plus double any share price gain, subject to a maximum return of 29%. Investors will receive par if the share price declines by 10% or less and will lose 1% for each 1% share price decline beyond 10%.

UBS Financial Services Inc. and Lehman Brothers Inc. are the underwriters for both series.

"Most accelerated structures have an index as an underlying," the structurer said. "Fundamentally there's no real difference between having a single stock as your underlying and an index. I guess some people might be more comfortable with one than the other."

Lehman links to worst performer

Lehman on Wednesday also announced plans for a product that will be linked to the least-performing stock in a basket.

The reverse exchangeables will pay par of $1,000 at maturity unless the final share price is less than its initial share price and the underlying share price falls below the trigger price. If the trigger event occurs and the underlying share price ends below the initial price, the payout will be a number of shares of the underlying equal to par divided by the current stock price.

The coupon and the reference stocks were not yet determined.

Svensk prices MLCX Grains Elements

AB Svensk Exportkredit set the final pricing on its $250 million of 0% Elements due 2023 linked to the MLCX Grains Index - Total Return via agents Nuveen Investments and Merrill Lynch & Co.

At maturity, set at Feb. 14, 2023, investors will receive par plus the index return, less an annual investor fee of 0.75% times the proportion of days elapsed. Beginning May 13, holders may put back the notes for repurchase on a weekly repurchase date.

There is a minimum put requirement of $5 million of securities.

The notes are listed on the American Stock Exchange under the symbol "GRU."

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