UBS to price notes linked to Russell 2000; Morgan Stanley to price S&P notes

By LLuvia Mares

New York, Dec. 24 - Leading structured products news in a shortened session Monday, UBS AG announced plans to price zero-coupon principal-protection absolute return barrier notes due July 31, 2009 linked to the Russell 2000 index.

If the index never closes above the upper index barrier or below the lower index barrier during the life of the notes, the payout at maturity will be par of $10 plus the absolute value of the index return. Otherwise, the payout will be par.

The upper and lower barriers will be between 29.5% and 31.5% above and below the initial index level. The exact levels will be set at pricing.

The notes will price on Jan. 28 and settle on Jan. 31.

UBS Investment Bank and UBS Financial Services will be the underwriters.

Morgan Stanley to price notes on S&P 500

In a separate structure, Morgan Stanley plans to price 0% annual review notes due Jan. 13, 2011 linked to the S&P 500 index via agent J.P. Morgan Securities Inc.

The notes will price Dec. 28 and settle Jan. 7.

The notes will be automatically called at increasing premiums if the index level is at or above the initial index level on one of three annual review dates.

For each $1,000 principal amount, the redemption amount will be par plus at least 10.25% if the notes are called on Jan. 8, 2009, par plus at least 20.5% if called on Jan. 8, 2010 and par plus at least 30.75% if called on Jan. 10, 2011. The exact redemption amounts will be determined at pricing.

If the notes are not called, the payout at maturity will be par unless the index declines by more than 10%. Investors will lose 1.1111% for every 1% decline in the index beyond 10%.

Lehman prices $50 million synthetic convertibles

In another deal, Lehman Brothers Holdings Inc. priced $50 million of 2% synthetic convertible notes due Dec. 31, 2012 linked to the common stock of Nestle SA. Interest is payable semiannually.

The notes are convertible at any time for the cash value in dollars of 1.8897 Nestle shares - 1.8897 equals $1,000 divided by CHF 610.8825, the conversion price - calculated using the then-current dollar/Swiss franc exchange rate.

The conversion price is 17.5% higher than the stock's share price on the pricing date, which was CHF 519.90, and was determined using the dollar/Swiss franc exchange rate on that date, which was 1.544 Swiss francs per dollar.

The payout at maturity will be the greater of par in cash or the cash value of 1.8897 Nestle shares, determined using the then-current dollar/Swiss franc exchange ratio.

The notes will be callable beginning Dec. 21, 2009. The redemption amount will be calculated in the same manner as the payout at maturity.

Lehman Brothers Inc. is the underwriter.

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