-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M2ZIspZKr6zcu0DiyPZDlXxdmcvs2W5AH2VFdU/H7iZiO1bDy+TxBDexFYlk22nj vsvpx20Nx8BRC+lewIFVCg== 0001104659-08-005080.txt : 20080128 0001104659-08-005080.hdr.sgml : 20080128 20080128162039 ACCESSION NUMBER: 0001104659-08-005080 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20080128 DATE AS OF CHANGE: 20080128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-134553 FILM NUMBER: 08554323 BUSINESS ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125267000 MAIL ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 424B2 1 a08-1010_94424b2.htm 424B2

 

Calculation of the Registration Fee

 

Title of Each Class of Securities
Offered

 

Maximum Aggregate Offering

Price

 

Amount of Registration Fee(1)(2)

 

Notes

 

$15,000,000

 

$589.50

 

 

(1) Calculated in accordance with Rule 457(r) of the Securities Act of 1933.

 

(2) Pursuant to Rule 457(p) under the Securities Act of 1933, filing fees have already been paid with respect to unsold securities that were previously registered pursuant to a Registration Statement on Form S-3 (No. 333-134553) filed by Lehman Brothers Holdings Inc. and the other Registrants thereto on May 30, 2006, and have been carried forward, of which $589.50 is offset against the registration fee due for this offering and of which $1,278,626.33 remains available for future registration fees. No additional registration fee has been paid with respect to this offering.

 



 

Filed Pursuant to Rule 424(b)(2)

Registration No. 333-134553

 

PRICING SUPPLEMENT NO. 624 dated January 24, 2008

to Prospectus Supplement dated May 30, 2006

and Prospectus dated May 30, 2006

 

LEHMAN BROTHERS HOLDINGS INC.

Medium-Term Notes, Series I

 

This Pricing Supplement supplements the terms and conditions in, and incorporates by reference, the Prospectus, dated May 30, 2006, as supplemented by the Prospectus Supplement, dated May 30, 2006 (as so supplemented, together with all documents incorporated by reference therein, the “Prospectus”), and should be read in conjunction with the Prospectus. Unless otherwise defined in this Pricing Supplement, terms used herein have the same meanings as are given to them in the Prospectus.

 

CUSIP No.:

 

5252M0CK1

 

 

 

 

 

 

 

ISIN:

 

US5252M0CK14

 

 

 

 

 

 

 

Specified Currency:

 

Principal:

 

U.S. Dollars

 

 

Interest:

 

U.S. Dollars

 

 

 

 

 

Principal Amount:

 

$15,000,000

 

 

 

 

 

Total

 

Per Note

 

Issue Price (1):

 

$

15,000,000

 

100.00

%

Agent’s Commission (2):

 

$

0

 

0.00

%

Proceeds to Lehman Brothers Holdings:

 

$

15,000,000

 

100.00

%

 

(1)

 

The Issue Price includes Lehman Brothers Holdings Inc.’s cost of hedging its obligations under the Notes through one or more of its affiliates, which includes such affiliates expected cost of providing such hedge as well as the profit these affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge.

 

1



 

(2)

 

Lehman Brothers Inc. and/or an affiliate may earn additional income as a result of payments pursuant to any hedges.

 

On the Issue Date, we may, without the consent of the holders of the Notes, issue additional notes similar to these Notes in all respects except for the Issue Price. Following the Issue Date, we may, without the consent of the holders of Notes, create and issue additional notes similar to these Notes in all respects except for the Issue Date, Issue Price and the payment of interest accruing prior to the Issue Date of such additional notes. All such additional notes will be consolidated and form a single tranche with, have the same CUSIP and ISIN numbers as and trade interchangeably with these Notes.

 

Agent:

 

Lehman Brothers

 

 

 

 

 

 

 

 

 

 

 

Agent’s Capacity:

 

x As principal

o As agent

 

 

 

 

 

 

 

Trade Date:

 

January 24, 2008

 

 

 

 

 

 

 

 

 

 

 

Issue Date:

 

February 12, 2008

 

 

 

 

 

 

 

 

 

 

 

Stated Maturity Date:

 

February 12, 2038; provided that if such day is not a Business Day, then such day will be the following Business Day.

 

 

 

 

 

 

 

Redemption at Maturity:

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

Date From Which Interest Accrues:

 

x

Issue Date

 

 

 

 

 

 

o

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

o

Fixed Rate Note

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate per Annum:

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

x

Floating Rate Note

 

o

CD Rate

 

 

 

 

 

 

 

o

Commercial Paper Rate

 

 

 

 

 

 

 

o

Federal Funds (Effective) Rate

 

 

 

 

 

 

 

o

Federal Funds (Open) Rate

 

 

 

 

 

 

 

o

LIBOR Telerate

 

 

 

 

 

 

 

o

LIBOR Reuters

 

 

 

 

 

 

 

o

EURIBOR

 

 

 

 

 

 

 

o

Treasury Rate:

Constant Maturity

o Yes    o No

 

 

 

 

 

 

 

o

Prime Rate

 

 

 

 

 

 

 

o

Eleventh District Cost of Funds Rate

 

 

 

 

 

 

 

o

CMS Rate

 

 

 

 

 

 

 

x

Other: See “Interest Rate” below

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate:

 

For each Interest Payment Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

Base Interest Rate + Excess Interest Balance (if any)

 

 

 

 

 

2



 

 

 

for the related Interest Period, provided that the Interest Rate payable on any Interest Payment Date shall not exceed the Per Annum Interest Rate Cap for the related Interest Period.

 

 

 

 

 

 

 

Base Interest Rate:

 

For each Interest Period, from and including the Issue Date to but excluding August 12, 2008:

 

 

 

 

 

 

 

 

 

9.30%;

 

 

 

 

 

 

 

 

 

 

 

 

 

For each Interest Period, from and including August 12, 2008 to but excluding the Maturity Date:

 

 

 

 

 

 

 

 

 

{3m LIBOR + 6.40%} x Interest Accrual Factor;

 

 

 

 

 

 

 

 

 

 

provided that, the Base Interest Rate for any Interest Period shall not be less than 0.00%.

 

 

 

 

 

 

 

Interest Accrual Factor:

 

For each Interest Period, commencing on August 12, 2008, the number of calendar days during that Interest Period on which:

 

 

 

 

 

 

 

 

 

(i)

 

Rolling 3m LIBOR is less than or equal to 3.00%,

 

 

 

 

 

 

 

 

 

 

 

 

 

- or -

 

 

 

 

 

 

 

 

 

 

 

(ii)

 

the Rolling SIFMA/LIBOR Ratio is less than or equal to 77%

 

 

 

 

 

 

 

 

 

divided by the total number of calendar days in that Interest Period.

 

 

 

 

 

Per Annum Interest Rate Cap:

 

For each Interest Period, a percentage per annum equal to the lesser of:

 

 

 

 

 

 

 

(a)

 

17%;

 

 

 

 

 

 

 

 

 

 

 

 

 

- and –

 

 

 

 

 

 

 

 

 

 

 

(b)

 

1.9 * {3m LIBOR + Reference Spread}

 

 

 

 

 

 

 

Reference Spread:

 

2.0%

 

 

 

 

 

 

 

Interest Period:

 

From and including each Interest Payment Date (or the Issue Date, in the case of the first Interest Period) to but excluding the next succeeding Interest Payment Date (or the Maturity Date, in the case of the final Interest Period).

 

3



 

Interest Reset Dates:

 

Quarterly on the 12th of February, May, August and November, commencing on August 12, 2008, for the Interest Period commencing on such date.

 

 

 

 

 

 

 

Interest Rate Determination Date:

 

Two Business Days prior to the related Interest Reset Date.

 

 

 

 

 

 

 

 

3m LIBOR:

 

For each Interest Reset Date, 3-Month USD LIBOR as published on Reuters Page LIBOR01 at 11:00 am London time on the related Interest Rate Determination Date; provided, however, for purposes of calculating the Per Annum Interest Rate Cap on or prior to August 12, 2008, 3m LIBOR shall mean 3-Month USD LIBOR as published on Reuters Page LIBOR01 at 11:00 am London time two Business Days prior to the commencement of the related Interest Period.

 

 

 

Interest Payment Dates:

 

Quarterly on the 12th of each February, May, August and November, commencing on May 12, 2008 and ending on the Maturity Date.

 

 

 

Excess Interest Balance:

 

For each Interest Period:

 

 

 

 

 

(a)

the sum of the Excess Interest Rate for all prior interest Periods; minus

 

 

 

 

 

 

(b)

the total Excess Interest Balance (expressed as a percentage) paid on the Interest Payment Dates for all prior Interest Periods.

 

 

 

 

Excess Interest Rate:

 

For each Interest Period:

 

 

 

 

 

(a)

the Interest Rate that would have been paid on the Interest Payment Date for that

 

 

Interest Period absent the Per Annum Interest Rate Cap; minus

 

 

 

 

 

(b)

the Per Annum Interest Rate Cap.

 

 

 

 

 

 

provided that the Excess Interest Rate for any Interest Period shall not be less than 0.00%.

 

 

 

Rolling 3m LIBOR:

 

For each day in an Interest Period, commencing on August 12, 2008, Adjusted 3m LIBOR on the immediately preceding Evaluation Date (or if such day is an Evaluation Date, on such Evaluation Date).

 

 

 

Evaluation Dates:

 

August 12, 2008 and Thursday of each week thereafter (or if any such Thursday is not a Business Day, the next succeeding Business Day).

 

4



 

Adjusted 3m LIBOR:

 

For each Evaluation Date, the non-compounded weekly weighted average of Weekly 3m LIBOR in the Evaluation Period ending on but excluding such Evaluation Date, calculated by multiplying each Weekly 3m LIBOR in effect during such Evaluation Period by the number of calendar days such Weekly 3m LIBOR is in effect, adding the products so determined and dividing that sum by the number of calendar days in such Evaluation Period. Weekly 3m LIBOR in effect for any day in an Evaluation Period shall equal Weekly 3m LIBOR on the immediately preceding 3m LIBOR Reset Date (or if such day is a Weekly 3m LIBOR Reset Date, on such Weekly 3m LIBOR Reset Date).

 

 

 

Evaluation Period:

 

From and including the date which is 180 calendar days prior to an Evaluation Date to but excluding that Evaluation Date.

 

 

 

Weekly 3m LIBOR:

 

For each Weekly 3m LIBOR Reset Date, 3-Month USD LIBOR as published on Reuters Page LIBOR01 at 11:00 am London time on the Wednesday preceding such Weekly 3m LIBOR Reset Date (or if such Wednesday is not a Business Day, the next succeeding Business Day).

 

 

 

Weekly 3m LIBOR Reset Dates:

 

Thursday of each week (or if any such Thursday is not a Business Day, the next succeeding Business Day).

 

 

 

Rolling SIFMA/LIBOR Ratio:

 

For each day in an Interest Period, commencing on August 12, 2008, the SIFMA/LIBOR Ratio on the immediately preceding Evaluation Date (or if such day is an Evaluation Date, on such Evaluation Date).

 

 

 

SIFMA/LIBOR Ratio:

 

For each Evaluation Date, the Avg SIFMA Rate divided by Adjusted 3m LIBOR.

 

 

 

Avg SIFMA Rate:

 

For each Evaluation Date, the non-compounded weekly weighted average of the SIFMA Rate in the Evaluation Period ending on but excluding such Evaluation Date, calculated by multiplying each SIFMA Rate in effect during such Evaluation Period by the number of calendar days such SIFMA Rate is in effect, adding the products so determined and dividing that sum by the number of calendar days in such Evaluation Period. The SIFMA Rate in effect for any day in an Evaluation Period shall equal the SIFMA Rate on the immediately preceding SIFMA Reset Date (or if such day is a SIFMA Reset Date, on such SIFMA Reset Date).

 

5



 

SIFMA Reset Dates:

 

Thursday of each week (or any other day in each week specified by the Index Sponsor, or if any such Thursday is not a U.S. Government Securities Business Day, the next succeeding U.S. Government Securities Business Day).

 

 

 

SIFMA Rate:

 

For each SIFMA Reset Date, the level of the Index (subject to “Discontinuance or Revision of Index” below) determined and reported on the Wednesday preceding such SIFMA Reset Date (or any other day in each week specified by the Index Sponsor, or if any such Wednesday is not a U.S. Government Securities Business Day, the next succeeding U.S. Government Securities Business Day).

 

 

 

 

 

If the SIFMA Rate for any SIFMA Reset Date is not determined or reported by MMD (as defined below), the SIFMA Rate for such SIFMA Reset Date will be the SIFMA Rate in effect on the immediately preceding SIFMA Reset Date. For further information on the Index, see “Information on the Securities Industry and Financial Markets Association Municipal Swap Index” below.

 

 

 

Day Count Basis:

 

30/360

 

 

 

Business Day Convention:

 

Following, unadjusted

 

 

 

Denominations:

 

$10,000 and integral multiples of $10,000

 

 

 

Calculation Agent:

 

Lehman Brothers Special Financing Inc.

 

 

 

Index:

 

The Securities Industry and Financial Markets Association Municipal Swap Index (formerly The Bond Market Association/PSA Municipal Swap Index) produced and reported by the Index Sponsor

 

 

 

Index Sponsor:

 

Thomson Municipal Market Data, a Thompson Financial Services Company (“MMD”), or any successor

 

 

 

Discontinuance or

 

 

Revision of Index:

 

If MMD discontinues publication of the Index and MMD or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Index (such index, a “Successor Index”), then the SIFMA Rate for each SIFMA Reset Date occurring after such discontinuance will be determined by reference to the level of such Successor Index. If a Successor Index is selected, the Successor Index will be substituted for the Index for all purposes. Upon any selection by the Calculation Agent of a Successor Index, the Calculation Agent will cause written

 

6



 

 

 

notice thereof to be promptly furnished to the Issuer and to the trustee, which will provide notice to the holders of the Notes.

 

 

 

 

 

 

 

 

 

If MMD discontinues publication of the Index and the Calculation Agent determines, in its sole discretion, that no Successor Index is available, then following such discontinuance until the earlier of (a) the Maturity Date or (b) the date on which the Calculation Agent determines that a Successor Index is available, the Calculation Agent will determine the SIFMA Rate for each SIFMA Reset Date occurring after such discontinuance in accordance with the procedures for and method of calculating the Index last in effect prior to such discontinuance.

 

 

 

 

 

 

 

 

 

If the SIFMA Rate for any SIFMA Reset Date is subsequently revised or amended after its publication, such revision or amendment will not be effective for purposes of any calculation with respect to the Notes, except in the event of manifest error (as determined by the Calculation Agent in its sole discretion).

 

 

 

 

 

 

 

Business Days:

 

London and New York

 

 

 

 

 

 

 

U.S. Government Securities

 

 

 

 

 

 

Business Day:

 

Any day except for a Saturday, Sunday or a day on which The Securities Industry and Financial Markets Association (formerly The Bond Market Association) recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

 

 

 

 

 

 

 

Form of Note:

 

x Book-entry only (global)

o Certificated

 

7



 

SUPPLEMENTAL RISK FACTORS

 

An investment in the Notes entails certain risks not associated with an investment in conventional floating rate or fixed rate medium-term notes. See “Risk Factors” in the Series I MTN prospectus supplement.  In addition, the notes are subject to the further specific risks discussed below.

 

The amount of interest payable on any Interest Payment Date for the notes is uncertain and may be zero.

 

Commencing on August 12, 2008, the interest payable on the notes is uncertain, and movements in Rolling 3m LIBOR and the Rolling SIFMA/LIBOR Ratio will affect whether or not and the extent to which you will receive interest on the notes in the Interest Period.  The maximum Interest Rate (subject to the Per Annum Interest Rate Cap) on the notes is equal to (3m LIBOR + 6.40%) (the “Base Interest Rate”) plus the Excess Interest Balance (if any).  However, for every day during the Interest Period on which Rolling SIFMA/LIBOR Ratio is greater than 77.0% and Rolling 3m LIBOR is greater than 3.00%, the Base Interest Rate for the Interest Period will be reduced, and accordingly, your return for the Interest Period over the life of the notes could be significantly less than maximum Interest Rate for the Interest Period.  If on every day in the Interest Period both (i) the Rolling SIFMA/LIBOR Ratio is greater than 77.0% and (ii) Rolling 3m LIBOR is greater than 3.00%, the Base Interest Rate for the Interest Period will be zero.

 

The interest payable on the notes will be capped.

 

The Per Annum Interest Rate Cap limits the quarterly interest payment to the lesser of the following per annum rates a) 17% and b) 1.9 times the sum of the three-month LIBOR and 2.00%. Thus the yield on the notes may be less than the yield on a similar security with a comparable payout structure that does not limit the quarterly interest payments.

 

A number of factors can affect the Rolling SIFMA/LIBOR Ratio and, therefore, the interest payable on the notes and the market value of the notes.

 

Commencing on August 12, 2008, the amount of interest, if any, payable on the notes, will depend on the movements of Rolling 3m LIBOR and the Rolling SIFMA/LIBOR Ratio, as discussed above.  A number of factors can affect the value of the notes, including (among others):

 

·

changes in or perceptions about future marginal tax rates – generally, decreases in, or a perception that there will be decreases in, marginal tax rates are expected to increase the Rolling SIFMA/LIBOR Ratio;

 

 

·

changes or uncertainty with respect to the tax-exempt nature of municipal securities – generally, changes in the tax laws that have an adverse effect on the tax-exempt nature of municipal securities are expected to increase the Rolling SIFMA/LIBOR Ratio;

 

 

·

changes in the tax treatment of comparable securities – changes in the tax laws that grant securities other than municipal securities favorable tax treatment to investors may adversely impact market demand for and pricing of municipal securities generally, which development would be expected to increase the Rolling SIFMA/LIBOR Ratio;

 

8



 

·

relative supply and demand for tax-exempt and taxable debt in their respective marketplaces and other factors affecting pricing of tax-exempt debt – a relative decline in demand for or an increase in supply of tax-exempt debt caused by factors other than tax rates (such as fragmentation in the market for municipal securities, uncertainty regarding the rights of holders of municipal securities, and illiquidity) could increase the Rolling SIFMA/LIBOR Ratio, to the extent that the SIFMA Rate increases relative to 3m LIBOR as a result of these developments; and

 

 

·

changes with respect to the ratings of insurers of municipal securities – certain municipal securities included in the Index may have credit support in the form of insurance from a municipal security insurer. A downgrade in the ratings of such insurers may adversely impact the pricing of those municipal securities, which would be expected to increase the Rolling SIFMA/LIBOR Ratio.

 

These and other factors may have a negative impact on the coupon payable on the Notes, as well as on the market value of the Notes and, therefore, on the price you may receive in connection with a sale of the Notes prior to maturity.

 

The Interest Accrual Factor, and as a result, the Interest Rate, is based in part upon the level of the Index calculated by MMD.  MMD may discontinue the Index or adjust the Index in a way that affects its level.

 

The Index is produced by MMD, a third party unaffiliated with Lehman Brothers Holdings Inc.  MMD may make methodological or other changes that could change the level of the Index, including changes related to the method by which the Index is calculated, the criteria for eligibility in the Index, or the timing with which the Index is published.  In addition, MMD may alter, dis continue or suspend calculation or dissemination of the Index.  MMD has no obligation to consider the interests of holders of the notes in calculating, revising or discontinuing the Index.  In the event that the Index is no longer published, another measure of tax-exempt VRDO (as defined in “Information on the Securities Industry and Financial Markets Association Municipal Swap Index” below) rates will be employed to determine the SIFMA Rate used to calculate the Interest Adjustment Amount.  No assurance can be given that rates used in lieu of the Index vales will be accurate assessments of the average tax-exempt VRDO rates that the Index is currently intended to assess.  Any of these actions could adversely affect the SIFMA Rates used to calculate the Rolling SIFMA/LIBOR Ratio and, therefore, the value of the notes or the interest payable on any Interest Payment Date.

 

The inclusion in the original issue price of the broker’s fee and Lehman Brothers Holdings Inc.’s cost of hedging its obligations under the Notes through one or more of its affiliates is likely to adversely affect the value of the Notes prior to maturity.

 

The original issue price of the Notes includes the broker’s fee and Lehman Brothers Holdings Inc.’s cost of hedging its obligations under the Notes through one or more of its affiliates.  Such cost includes such affiliates’ expected cost of providing this hedge, as well as the profit these affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge.  As a result, assuming no change in market conditions or any other relevant factors, the price, if any, at which a broker will be willing to purchase notes from you in secondary market transactions, if at all, will likely be lower than the original issue price.  In addition, any such

 

9



 

prices may differ from values determined by pricing models used by a broker, as a result of such compensation or other transaction costs.

 

Trading by Lehman Brothers Inc. or its affiliates in the variable-rate demand obligations included in the Index may affect the return on the Notes.

 

Lehman Brothers Inc., an affiliate of Lehman Brothers Holdings Inc., and certain other affiliates of Lehman Brothers Holdings Inc., may, from time to time, trade in some or all of the variable-rate demand obligations (“VRDOs”) (as discussed in “Information on the Securities Industry and Financial Markets Association Municipal Swap Index” below) included in the Index on a spot and forward basis and other contracts and products in or related to such VRDOs.  In addition, the VRDO rate quotations that Lehman Brothers Holdings Inc.’s remarketing agent affiliate furnishes to MMD may account for a significant portion of the VRDO rates that underlie the Index.  As a result, the rates contributed by this remarketing agent affiliate could potentially have a significant impact on the Index level, which is the non-weighted average of all of the individual VRDO rates used that week, after dropping rates outside one standard deviation.

 

Lehman Brothers Inc. and certain of its affiliates or other affiliates of the Lehman Brothers Holdings Inc. may also issue or underwrite other financial instruments with returns indexed to the prices of the VRDOs included in the Index, or such VRDOs and related derivatives. These trading and underwriting activities could affect the level of the Index in a manner that would be adverse to the holders’ investment in the Notes. With respect to any such activities, none of Lehman Brothers Inc., its affiliates or other affiliates of the Lehman Brothers Holdings Inc. has any obligation to take the needs of any buyers, sellers or holders of the Notes into consideration at any time.

 

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

 

We intend to treat the Notes as contingent payment debt instruments, as described under “Supplemental United States Federal Income Tax Consequences—Contingent Payment Debt Instruments” in the Series I MTN prospectus supplement.

 

10



 

HISTORICAL LIBOR/SIFMA INFORMATION

 

The following charts show certain historical information concerning Adjusted 3m LIBOR, the Avg SIFMA Rate and the Rolling SIFMA/LIBOR Ratio.  These charts were prepared using historical data on 3m LIBOR and the SIFMA Rate obtained from Bloomberg Financial Markets; neither Lehman Brothers Inc. nor Lehman Brothers Holdings Inc. makes any representation or warranty as to the accuracy or completeness of this data.  The historical experience of 3m LIBOR, the SIFMA Rate and the Rolling SIFMA/LIBOR Ratio is not necessarily indicative of, and should not be taken as an indication of, the future performance of 3m LIBOR, the SIFMA Rate or the Rolling SIFMA/LIBOR Ratio during the term of the notes, or what the value of the notes may be.  Fluctuations in the level of 3m LIBOR and the SIFMA Rate make Rolling 3m LIBOR and the Rolling SIFMA/LIBOR Ratio, and therefore the notes’ effective Base Interest Rate, difficult to predict and can result in effective Base Interest Rates to investors that are lower than anticipated.  Historical fluctuations in 3m LIBOR and the SIFMA Rate may be greater or lesser than fluctuations in 3m LIBOR and the SIFMA Rate experienced by the holders of the notes.

 

The following chart shows Adjusted 3-month LIBOR on Wednesday of each week in the period from the week ending January 22, 1997 through the week ending January 23, 2008.

 

 

11



 

The following chart shows the Avg SIFMA Rate on Thursday of each week in the period from the week ending January 23, 1997 through the week ending January 24, 2008.

 

 

The following chart shows the Rolling SIFMA/LIBOR Ratio on Thursday of each week in the period from the week ending January 23, 1997 through the week ending January 24, 2008.

 

 

12



 

INFORMATION ON THE SECURITIES INDUSTRY AND FINANCIAL MARKETS
ASSOCIATION MUNICIPAL SWAP INDEX

 

We have derived all information regarding the Index contained herein, including its make-up, method of calculation and changes in its components, without verification  from publicly available information prepared by Securities Industry and Financial Markets Association (“SIFMA”) and Municipal Market Data (“MMD”), a Thomson Financial Services company.  Such information reflects the policies of, and is subject to change by SIFMA and/or MMD.  Neither we nor Lehman Brothers Inc. make any representation that the publicly available information about the Index is accurate or complete.

 

The Index is determined, comprised and calculated by MMD without regard to the Notes, and the Notes are not sponsored, endorsed, or promoted by MMD. MMD makes no representation or warranty, express or implied, to the holder of the Notes or to any member of the public regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the MMD to track the performance of municipal swaps.  Neither MMD nor SIFMA represents that the Index is accurate or complete and it should not be relied upon as such.  MMD has no obligation to continue to publish, and may discontinue publication of, the Index.  The consequences of the Index Sponsor discontinuing or modifying the Index are described above under “Discontinuation or Revision of the Index”.  MMD has no obligation to take the needs of any party into consideration in determining, composing or calculating the Index.  In no event shall MMD have any liability to noteholders or to any other third party for damages of any kind incident to the use of the Index.

 

The Securities Industry and Financial Markets Association Municipal Swap Index (formerly The Bond Market Association/PSA Municipal Swap Index) (the “Index”) was created by SIFMA (formerly The Bond Market Association, or “BMA”) and is produced by MMD.   The Index is a seven-day high-grade market index comprised of tax-exempt VRDOs from MMD’s database of VRDO issues.  The weekly Index level is the non-weighted average of the weekly rates of various VRDO issues included in the Index.  The Index is calculated on a weekly basis, and released to subscribers on Wednesday, and becomes effective on the following Thursday.  The actual number of issues that make up the Index will vary in time as issues are called, converted, mature or are newly issued.  In addition, if changes occur which violate the criteria or calculation methods of the Index, an issue will be dropped. The qualification criteria for the Index have been established by a subcommittee of SIFMA (formerly the BMA).  Typically, the Index has included 650 issues in any given week.

 

Under the qualification criteria currently in effect, in order to be eligible for inclusion in the Index, each component VRDO must:

 

·

have a weekly reset, effective on Wednesday;

 

 

·

be tax-exempt for federal income tax purposes and not subject to Alternative Minimum Tax under the Internal Revenue Code of 1986, as amended;

 

 

·

have an outstanding amount of $10 million or more;

 

13



 

·

have the highest available short-term rating (i.e., be rated “VMIG1” by Moody’s Investors Service, Inc. or “A-1+” by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies); and

 

 

·

pay interest on a monthly basis, calculated on an actual/actual basis.

 

In addition, only one quote per obligor per remarketing agent will be included in the Index. Issues from all states are eligible for inclusion.

 

In calculating the Index, (i) the standard deviation of the rates of the component VRDOs is calculated and any rate falling outside of +/- 1.0 standard deviations is not included, and (ii) an averaging method is used to ensure that no participating remarketing agent represents more than 15% of the Index.

 

For certain historical levels of the Index, see “Historical LIBOR/SIFMA Information” above.

 

SUPPLEMENTAL INFORMATION CONCERNING THE PLAN OF DISTRIBUTION

 

Lehman Brothers Holdings has agreed to sell to Lehman Brothers Inc. (the “Agent”), and the Agent has agreed to purchase from Lehman Brothers Holdings Inc. the principal amount of the Notes at the price specified on the cover of this pricing supplement.  The Agent is committed to take and pay for all of the Notes, if any are taken.

 

The Agent proposes to offer the Notes initially at a public offering price equal to the Issue Price set forth above and to certain dealers at a discount to such price.  After the initial public offering, the public offering price and other selling terms may from time to time be varied by the Agent. It is expected that delivery of the Notes will be made against payment therefor more than three business days following the date of this pricing supplement. Trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the securities on any day prior to the third business day before the settlement date will be required to specify an alternative settlement cycle at the time of any such trade to prevent failed settlement.

 

If the Notes are sold in a market-making transaction after their initial sale, information about the purchase price and the date of the sale will be provided in a separate confirmation of sale.

 

14


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