Lehman to issue 20.45% reverse exchangeables linked to Morgan Stanley

By E. Janene Geiss

Philadelphia, Nov. 7 - Lehman Brothers Holdings Inc. plans to price an issue of reverse exchangeable notes due May 30, 2008 linked to the common stock of Morgan Stanley, according to an FWP filing with the Securities and Exchange Commission.

The six-month notes will pay 10.225% for an annualized rate of 20.45%. Interest will be payable monthly.

The payout at maturity will be par unless Morgan Stanley stock falls below the knock-in level - 80% 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 Morgan Stanley shares equal to $1,000 divided by the initial share price.

The notes are expected to price on Nov. 27 and settle on Nov. 30.

Lehman Brothers Inc. is the agent.

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