Svensk, Lehman bring large exchangeable deals; Deutsche plans $250 million Morningstar offering

New York, Oct. 16 - Two large deals exchangeable for the underlying shares have stood out in structured products activity over recent sessions.

AB Svensk Exportkredit announced on Monday the pricing of $73.7 million of 10% exchangeable notes linked to the American Depositary Receipts of Teva Pharmaceuticals Industries Ltd.

Meanwhile Lehman Brothers Holdings Inc. priced an $87.6325 million issue of 6% premium income exchangeable securities due Oct. 12, 2010 exchangeable into shares of General Mills Inc. The deal was upsized from its original amount of $22.6325 million, itself a substantial amount for a structured products offering.

Both deals are linked directly to the underlying stock with no upside cap. And while both pay coupons, they are small by the standards of reverse convertibles.

Svensk exchangeable for Teva

For Svensk Exportkredit's deal exchangeable for Teva ADRs, the principal amount of each note is $44.8077, the closing price of Teva ADRs on the pricing date of Oct. 11.

If the final price of Teva ADRs is less than the protection strike price of $31.3654 - 70% of the initial price - the payout at maturity for each note will be 0.92593 times the protection strike price.

If the final price of Teva ADRs is at least the protection strike price but less than the lower strike price of $48.3921 - 108% of the initial price - the payout will be 0.92593 times the final price of Teva ADRs.

If the final price of Teva ADRs is at least the lower strike price but less than the upper strike price of $50.9912 - 113% of the initial price - the payout will be par.

If the final price of Teva ADRs is at least the upper strike price, the payout will be 0.65 times the final price of Teva ADRs.

Morgan Stanley & Co. Inc. is the agent.

Lehman's General Mills PIES

Lehman's deal linked to General Mills was in the Premium Income Exchangeable Securities structure; the original $22.6325 priced on Oct. 4 at par with a 20% initial conversion premium. Lehman subsequently added a further $65 million, selling them at 100.4.

There is an over-allotment option for an additional $9,789,000 of securities.

The initial execution price for the deal is $57.75 and the conversion price is $69.30. The conversion ratio is 0.4329 shares of General Mills common stock.

There are no calls or puts.

Lehman Brothers has the option to pay bond holders in cash rather than General Mills stock.

Deutsche to bring Morningstar deal

In other structured products news Tuesday, Deutsche Bank AG announced a large offering linked to an unusual index, the Morningstar Wide Moat Focus Total Return index.

The deal will be $250 million of 0% Elements due Oct. 24, 2022 linked to the Morningstar Wide Moat Focus Total Return index via agents Nuveen Investments and Merrill Lynch & Co.

The notes will price on Oct. 17 and settle on Oct. 23.

The index is made up of 20 companies that Morningstar believes have a maintainable return on invested capital exceeding the cost of capital and a sustainable competitive advantage.

The redemption amount will be par plus the index return, less an annual investor fee of 0.75% times the proportion of days elapsed.

If the notes are not repurchased early, the payout at maturity will be calculated the same way.

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