Lehman to issue 10.75% reverse exchangeables linked to FedEx

By Angela McDaniels

Seattle, June 5 - Lehman Brothers Holdings Inc. plans to price an issue of 10.75% reverse exchangeable notes due Dec. 12, 2007 linked to the common stock of FedEx Corp., according to an FWP filing with the Securities and Exchange Commission.

The six-month notes will pay 5.375% for an annualized rate of 10.75%. Interest will be payable monthly.

The payout at maturity will be par unless FedEx stock falls below the knock-in level - 85% of the initial share price - during the life of the securities and finishes below the initial share price, in which case the payout will be a number of FedEx shares equal to $1,000 divided by the initial share price or, at Lehman's option, the equivalent cash value.

The notes are expected to price on June 7 and settle on June 12.

Lehman Brothers Inc. will be the underwriter.

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