Citigroup prices $205.5 million ELKS based on Halliburton; Lehman sells Analog Devices Yeelds

By Sheri Kasprzak

New York, Aug. 30 - Citigroup Funding, Inc. priced a sizable offering of equity linked securities connected to Halliburton Co.'s stock.

The $205.5 million ELKS bear interest at 11% annually and mature Aug. 22, 2007. The ELKS were priced on Aug. 25.

At maturity, whether the investors will receive their initial investment or Halliburton stock depends upon whether the stock has declined by 25% or more, down to $26.25, at any time after pricing.

"There are a lot of things our clients look for when picking an issuer to link to," said one market source familiar with the offering. "Obviously, Halliburton had strong earnings this [past] quarter and their stock has been strong and continues to climb. We feel pretty good about the structure. We feel the benefits from this will be greater than the risks to investors."

Even so, Halliburton's stock did drop on Wednesday, losing 55 cents to close at $32.99 (NYSE: HAL).

According to Halliburton's last earnings statement, released July 20, the company reported a net income of $509 million, compared to a net income of $384 million for the corresponding 2005 quarter.

This is not the first Halliburton offering announced after the company released its second-quarter earnings statement. Aug. 2, HSBC USA Inc. announced its plans to sell one-year reverse convertible notes linked to Halliburton's stock with an 18% coupon. As priced on Aug. 25, under the terms of those notes, if Halliburton's stock falls by 20% or more during the life of the notes and the stock finishes below the initial share price, the payout will be cash, with full exposure to the stock's decline, or a number of Halliburton shares equal to $1,000 divided by the initial share price. The deal was completed at $4.342 million.

Lehman's $189.63 million Yeelds

Elsewhere, Lehman Brothers Holdings Inc. priced $189.63 million in 10% yield enhanced equity linked debt securities linked to Analog Devices, Inc.

"I do think the investors are following the stock, at least the smart ones will, if you're talking over a broad term, and if they follow ADI, they'll see that the stock has been very stable and steadily growing," said one market source connected to the deal. "In the end it was a good match."

The notes are due March 5, 2007.

The payout at maturity will be the value of Analog Devices' stock during the averaging period of the last eight trading days ending Feb. 26, 2007. The payout is capped at $32.54286, 110.69% of the initial value of the stock.

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