REGISTRATION NO. 33-65674
NASD File No. 920707011
Rule 424(b)(2)
PRICING SUPPLEMENT NO. 37
DATED MARCH 25, 1994
(To Prospectus dated October 4, 1993 as supplemented by
a Prospectus Supplement dated March 4, 1994)
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series E
Due 9 Months or More from Date of Issue
(Indexed Note)
___________________________
Principal Amount: $25,000,000. See "Description
of Indexed Note-Maturity Amount"
below.
Stated Maturity: August 7, 1995
Issue Date: April 7, 1994
Issue Price: 100%
Agent's Commission: .15%
Interest Payment Dates: The 5th Business Day (as defined
herein) of each month,
commencing on May 6, 1994 and
ending on the Stated Maturity
Initial Interest Rate: To be determined as set forth
below under "Description of
Indexed Note - Interest".
Interest Rate Basis: The interest payable on any
Interest Payment Date (except
the Maturity Date) will be equal
to the greater of:
(i) the sum of (a) the amount
determined by multiplying the
principal amount of the Indexed
Note by the Total Return for the
preceding Interest Payment
Period plus (b) any relevant
Coupon Value for such Interest
Payment Period; or
(ii) zero.
See "Description of Indexed
Note-Interest" below.
Spread: None
Spread Multiplier: None
Interest Determination
Dates: Last calendar day of each month,
commencing April 30, 1994
Calculation Agent: Lehman Brothers Special
Financing Inc.
Interest Payment Period: Monthly
Interest Reset Period: Monthly
Index: An Index comprising up to four
Bonds selected by the Holder of
the Indexed Note and/or LIBOR.
See "Description of Indexed Note
- Notification of Bond
Selection: Calculations."
Maturity Amount: See "Description of Indexed Note
- Maturity Amount."
Form of Note: Book-Entry Note
Minimum Denomination $25,000,000
The aggregate principal amount of this offering is
$25,000,000 and relates only to Pricing Supplement No. 37.
Medium-Term Notes, Series E may be issued by the Company
in an aggregate principal amount of up to $2,500,000,000
and, to date, including this offering, an aggregate of
$1,275,150,000 Medium-Term Notes, Series E have been
issued and are outstanding.
THE INDEXED NOTE OFFERED HEREBY MAY NOT BE OFFERED OR SOLD
TO, OR PURCHASED BY OR FOR THE ACCOUNT OF, ANY PERSON
OTHER THAN A SOPHISTICATED INSTITUTIONAL INVESTOR THAT
REGULARLY ENGAGES IN THE PURCHASE OF SECURITIES THE
PRINCIPAL AND/OR INTEREST OF WHICH IS BASED UPON AN INDEX
OF SECURITIES.
I. General
The following description of the particular
terms of the Indexed Note (as defined below) supplements,
and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the
Notes set forth in the accompanying Prospectus Supplement
and the description of Debt Securities set forth in the
accompanying Prospectus, to which descriptions reference
is hereby made. All terms used herein but not otherwise
defined herein and which are defined in the accompanying
Prospectus or Prospectus Supplement shall have the
meanings therein assigned to them.
Interest
Interest on the Indexed Note in respect of an
Interest Payment Period (as defined below) will be payable
in arrears on the fifth Business Day of the month
following the last day of such Interest Payment Period
(each such day, an "Interest Payment Date"), beginning May
6, 1994. Interest on the Indexed Note will accrue from
and including the first calendar day of each month to but
excluding the first calendar day of the immediately
following month (each such period, an "Interest Payment
Period"); provided, however, that the first Interest
Payment Period shall commence on (and include) April 7,
1994 and shall end on (and include) April 30, 1994.
The amount of interest to be paid on the Indexed
Note on any Interest Payment Date (except the Maturity
Date) will be equal to the greater of (i) the sum of
(a) the amount determined by multiplying the principal
amount of the Indexed Note by the Total Return for the
preceding Interest Payment Period plus (b) any relevant
Coupon Value for such Interest Payment Period and
(ii) zero.
Maturity Amount
The amount payable at Maturity in respect of the
final Interest Payment Period and the principal amount of
the Indexed Note (the "Maturity Amount") will be the
greater of (i) the amount determined by multiplying
(a) the principal amount of the Indexed Note by (b) the
amount determined by deducting .31% from the Final Total
Return and (ii) zero. The "Final Total Return" will be
the sum of the Final Index Return for each of the
components in the Bond Selection in effect for the final
Interest Payment Period. The "Final Index Return" for
each such Bond Selection (other than for a LIBOR Index
Selection) will be determined based on the following
formula:
SW x [(BP2/ABP1) x (FX1/FX2)]
Where
SW = the Selection Weight
BP2 = The Bond Price as of the last Business Day of
the final Interest Payment Period
ABP1 = the Adjusted Bond Price as of the last Business
Day of the prior Interest Payment Period
FX1 = the Bond Currency/U.S. dollar exchange rate (in
units of currency per one U.S. dollar) for value
the Maturity Date as of 4:00 p.m. London time on
the last Business Day of the Interest Payment
Period preceding the final Interest Payment
Period
FX2 = the Bond Currency/U.S. dollar exchange rate (in
units of currency per one U.S. dollar) for value
the Maturity Date as of 4:00 p.m. London time on
the last day of the final Interest Payment
Period
The "Final Index Return" in respect of the LIBOR Index
shall be the "Index Return" for a LIBOR Index Selection as
set forth below.
The Maturity Amount will be payable on August 7, 1995, or,
if such date is not a Business Day, on the next succeeding
Business Day.
CERTAIN DEFINITIONS
"Adjusted Bond Price" as of any day and in
respect of any Bond will be as follows: In respect of the
first Interest Payment Period, the Adjusted Bond Price of
any Bond will equal the Bond Price of that Bond as of
March 31, 1994. Thereafter, the Adjusted Bond Price will
be determined as follows:
(a) If the Aggregate Bond Selection for
that Interest Payment Period is the same as the
Aggregate Bond Selection for the immediately
preceding Interest Payment Period, the Adjusted Bond
Price of any Bond will be the Bond Price of that Bond
as calculated on the last Business Day of the
immediately preceding Interest Payment Period for
which an interest payment was required to be made on
the Indexed Note, and, if an interest payment has not
been required, the Bond Price as of March 31, 1994;
(b) If the Aggregate Bond Selection for
that Interest Payment Period is different (by virtue
of the addition of, deletion from or other change in
a Bond Selection or by a change in the Selection
Weights of a Bond Selection) from the Aggregate Bond
Selection for the immediately preceding Interest
Payment Period and an interest payment was required
to be made on the Index Note in respect of the
immediately preceding Interest Payment Period, the
Adjusted Bond Price of any Bond in the new Aggregate
Bond Selection will be the Bond Price of that Bond
determined as of the last Business Day of the
immediately preceding Interest Payment Period; or
(c) If the Aggregate Bond Selection for
that Interest Payment Period is different (either by
virtue of the addition of, deletion from or other
change in a Bond Selection or by a change in the
Section Weights of a Bond Selection) from the
Aggregate Bond Selection for the immediately
preceding Interest Payment Period and an interest
payment was not required to be made on the Indexed
Note in respect of the immediately preceding Interest
Payment Period, the Adjusted Bond Price of any Bond
in the new Aggregate Bond Selection will be
calculated based on the following formula:
Total Return for the Bond Price of that
[1/(1 + immediately preceding )] x Bond determined as of
Interest Payment Period the last Business Day
of the immediately
preceding Interest
Payment Period
"Aggregate Bond Selection" is the composition of
the total allocation of the principal amount of the
Indexed Note, inclusive of each Bond Selection and its
Selection Weight.
"Bond" or "Bonds" means up to four of the
following (which in each case shall be limited to the most
recently issued Bonds (known as "on the run") in the
category selected) as determined in accordance with a Bond
Selection:
Treasury bonds with an initial maturity of
ten years issued by the Commonwealth of
Australia ("Australian Bonds").
Bonds with an initial maturity of ten years
issued by the Canadian Federal Government
("Canadian Bonds").
Obligations Assimilable du Tresor or other
bonds with an initial maturity of ten years
issued by the Treasury of France ("French
Bonds").
Bundesanleihen or other bonds with an
initial maturity of ten years issued by the
Federal Republic of Germany ("German
Bonds").
Bonds with an initial maturity of ten years
issued by the Government of Japan
("Japanese Bonds").
Gilts or other bonds with an initial
maturity of fifteen years issued by the
Treasury Department of the United Kingdom
("U.K. Bonds").
Bonds with an initial maturity of thirty
years issued by the United States Treasury
Department ("U.S. Bonds").
"Bond Currency" means, in respect of a Bond, the
lawful currency of the country that issued the Bond.
"Bond Price" as of any date and in respect of
any Bond, means the sum of the price of that Bond plus
accrued interest to, but excluding, the fifth Business Day
following that date.
"Bond Selection" means, in respect of any
Interest Payment Period, each of (i) the Bonds (up to
four) and, if applicable (ii) the LIBOR Index, as
designated by the Noteholder, and in such proportion, as
designated by the Noteholder in a Bond Notice.
"Business Day" means any day which is not a
Saturday, a Sunday or a public holiday or a day on which
banks in the city of New York and London are authorized or
directed to be closed.
"Coupon Value", in respect of a Bond in the Bond
Selection that has paid interest during an Interest
Payment Period (or, in the case of the first Interest
Payment Period, during the period from and including March 31,
1994 to and including April 30, 1994) means, the
amount calculated in accordance with the following
formula:
[(CR x SW x NRA) x ((Currency x Day Count) + 1)] / FXR
LIBOR Ratio
where
CR = the coupon rate of interest paid on that Bond
(which in the case of a Bond which pays interest
on a semi-annual or quarterly basis will be
divided by two or four, as applicable)
SW = the Selection Weight of that Bond in respect of
such Bond Selection
NRA = the principal amount of the Indexed Note
multiplied by a hypothetical Final Total Return
determined as if the last Business Day of the
prior Interest Payment Period had been the
Maturity Date. (In determining such amount, the
deduction of .31% in determining the Maturity
Amount will not be taken into account).
Currency
LIBOR = the London Interbank Offered Rate for deposits
in the Bond Currency for a period equal to the
actual number of days from (and including) the
date of payment of the amount in question to
(and excluding) the next Interest Payment Date,
determined on the second London Banking Day
prior to such Bond's payment date, which appears
on Telerate Page 3750 as of 11:00 a.m., London
time, on such date.
Day Count
Ratio = the actual number of days from (and including)
the date of payment of the amount in question
to (and excluding) the next Interest Payment
Date divided by 360.
FXR = the Bond Currency/U.S. dollar exchange rate (in
units of currency per one U.S. dollar) as of
4:00 p.m., London time as of the last Business
Day in the Interest Period for value the fifth
Business Day following such determination.
"Index Return" for an Interest Payment Period
(except for the final Interest Payment Period) will be
determined for each Bond Selection (other than for a LIBOR
Index Selection) based on the following formula:
SW x [(BP2/ABP1 x FX1/FX2) - 1]
where
SW = the Selection Weight of that Bond
BP2 = the Bond Price of that Bond as of the last
Business Day of the Interest Payment Period for
which such determination is being made
ABP1 = the Adjusted Bond Price as of the last Business
Day of the prior Interest Payment Period
FX1 = the Bond Currency/U.S. dollar exchange rate (in
units of currency per one U.S. dollar) for value
five Business Days following the day of such
determination as of 4:00 p.m. London time on the
last Business Day of the prior Interest Payment
Period
FX2 = the Bond Currency/U.S. dollar exchange rate (in
units of currency per one U.S. dollar) for value
five Business Days following the day of such
determination as of 4:00 p.m. London time on the
last day of the Interest Payment Period for
which the determination is being made
"Index Return" for an Interest Payment Period
(except for the final Interest Payment Period) for a LIBOR
Index Selection will be determined as the product of
(i) its Selection Weight and (ii) LIBOR for the Interest
Payment Period, and (iii) a fraction, the numerator of
which is the actual number of days in the Interest Payment
Period, and the denominator of which is 360.
"LIBOR" in respect of the LIBOR Index for an
Interest Payment Period means, the rate determined on the
basis of the offered rates for deposits in U.S. Dollars
for a period of one month which appear on Telerate Page
3750 as of 11:00 a.m., London time, on the last Business
Day in the preceding Interest Payment Period, and will be
determined for value the fifth Business Day following its
determination.
"LIBOR Index" means a return based on LIBOR.
"Selection Weight" means, in respect of a Bond
or the LIBOR Index a proportion of the principal amount of
the Indexed Note expressed as a percentage in whole
numbers (and between 0% and 100%), and in respect of such
a Bond or LIBOR Index selected by the Noteholder by means
of the notification procedure set forth below under
"Notification of Bond Selection; Calculations".
"Total Return" in respect of any Interest
Payment Period (except for the final Interest Payment
Period) will equal the sum of the Index Returns for each
Bond and, if applicable, for the LIBOR Index reflected in
the Bond Selection for such Interest Payment Period.
NOTIFICATION OF BOND SELECTION; CALCULATIONS
A Bond Selection will be designated in a notice
(the "Bond Notice") (which may be given orally (including
by telephone) or in writing (including by telecopier))
given by the Noteholder to Lehman Brothers Special
Financing Inc. (the "Calculation Agent") at 200 Vesey
Street, 12th Floor, New York, New York 10285, attention
of: Structured Bond Group (Telecopier (212) 528-6139;
telephone (212) 640-9605) not later than 12 noon, New York
time, on the day that is three Business Days preceding the
commencement of the relevant Interest Payment Period. In
the Bond Notice the Noteholder must specify (i) the Bond
or Bonds that will be included in the Aggregate Bond
Selection for the related Interest Payment Period,
(ii) the LIBOR Index if the Noteholder wishes to include
the LIBOR Index in the Aggregate Bond Selection and
(iii) the Selection Weight of each Bond Selection. All
oral Bond Notices must be confirmed to the Calculation
Agent in writing not later than the close of business on
the date such oral Bond Notice is first given. If the
holder of the Indexed Note fails to provide a timely Bond
Notice, the Bond Selection with respect to an Interest
Payment Period shall be the Bond Selection most recently
selected by the Noteholder for the prior Interest Payment
Period.
The Calculation Agent will determine the Bond
Prices based on the prices obtained by it from Lehman
Brothers International (Europe); the Calculation Agent
will also determine the exchange rates necessary to
certain calculations, and will make each calculation and
determination contemplated by the Indexed Note; such
calculations and determinations will be binding in the
absence of manifest error.
The Noteholder is not permitted to select any
Australian Bond, Japanese Bond or U.K. Bond with respect
to an Interest Payment Period if, during such Interest
Payment Period, the issuer thereof is scheduled to make
any payment in respect of interest on the principal of
such bond or other amount on such Bond.
If the Selection Weight results in a fractional
number of Bonds, the number of Bonds used for purposes of
any calculation contained herein shall be reduced to the
nearest whole number of Bonds, and the difference shall be
deemed to be a Bond Selection using the LIBOR Index.
The Indexed Note will be issued in a single
denomination of $25,000,000.
II. OTHER CONSIDERATIONS
Risks Associated with Payments of Interest on
the Indexed Notes and the Maturity Amount
Pursuant to the formula employed in determining
the amount of interest payable in respect of an Interest
Payment Period, an investor in the Indexed Notes may
receive no payment in respect of interest for one or more
Interest Payment Periods.
Pursuant to the formula employed in determining
the Maturity Amount, an investor in the Indexed Notes may
receive a payment in respect of the Maturity Amount that
is less than par. Such formula does not ensure any
minimum payment in respect of the Maturity Amount.
INFORMATION REGARDING THE BONDS
Investors are advised to conduct their own
research and review of publicly available information
regarding the Bonds and the performance of the Bonds.
SUPPLEMENTAL UNITED STATES
FEDERAL INCOME TAX DISCLOSURE
The following summary describes certain United
States federal income tax consequences of the ownership of
Indexed Notes as of the date hereof and is a supplement to
the discussion of United States Taxation found in the
Prospectus and Prospectus Supplement to which this Pricing
Supplement is attached. Except where noted, it deals only
with Indexed Notes held as capital assets and does not
deal with special situations, such as those of dealers in
securities, financial institutions, life insurance
companies or purchasers holding Indexed Notes as a part of
a hedging transaction or a position in a "straddle" for tax
purposes. Furthermore, the discussion below is based
upon the provisions of the Internal Revenue Code of 1986,
as amended (the "Code") and regulations, rulings and
judicial decisions thereunder as of the date hereof, and
such authorities may be repealed, revoked or modified so
as to result in federal income tax consequences different
from those discussed below. Persons considering the
purchase, ownership or disposition of Indexed Notes should
consult their own tax advisors concerning the federal
income tax consequences in light of their particular
situations as well as any consequences arising under the
laws of any other taxing jurisdiction.
As used herein, a "United States Holder" of an
Indexed Note means a holder that is a citizen or resident
of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an
estate or trust the income of which is subject to United
States federal income taxation regardless of its source.
A "Non-United States Holder" is a holder that is not a
United States Holder.
General
There are no regulations, cases or rulings
directly addressing the treatment of securities similar to
the Indexed Notes other than the Proposed Regulations
discussed below. Although not entirely free from doubt,
the Company believes on the basis of current law and the
treatment given the Indexed Notes under the Proposed
Regulations, that the Indexed Notes should be treated as
debt of the Company for federal income tax purposes. The
Company intends to treat the Indexed Notes as debt for
federal income tax purposes. Section 1936(a) of the
Energy Policy Act of 1992, as codified in Internal Revenue
Code Section 385(c), effective for instruments issued
after October 24, 1992, provides that the characterization
as of the time of issuance of an instrument as either debt
or equity by the issuer of the instrument shall be binding
on all holders of the instrument but is not necessarily
binding on the Secretary of the Treasury. Except as
provided in regulations to be issued, a holder of the
Indexed Note will not be bound by the characterization of
the Indexed Notes as debt by the company, if the holder
discloses on its tax return that it is treating the
Indexed Notes in a manner inconsistent with the
characterization of the Indexed Notes as debt.
Proposed original issue discount regulations
were originally issued by the Treasury Department on April
8, 1986 and were amended on February 28, 1991 (the "Proposed
Regulations"). These regulations, if adopted in
their current form, would require that payments under the
Indexed Note, all of which are contingent, be treated, in
certain instances, as a partial payment of interest and a
partial repayment of principal. On January 19, 1993, the
IRS released proposed regulations for publication in the
Federal Register (the "Release") which would have
withdrawn the Proposed Regulations to the extent relating
to contingent payment debt instruments, but prior to
publication in the Federal Register, the proposed
regulations contained in the Release were withheld from
publication pending review by the Clinton Administration.
The regulations contained in the Release would require
interest accruals to reflect either a market yield for the
debt instrument as of the issue date or a reasonable
estimate of the performance of contingencies in the tax
year. The amount of interest deemed to accrue in a
taxable year pursuant to such methods, however, must be
recognized regardless of whether the contingent payment
becomes fixed in such year.
It is uncertain whether or when, or in what
form, the Release will be published in the Federal
Register and what effect, if any, it will have on the
Indexed Notes. Furthermore, there can be no assurance
that the final Treasury Regulations relating to contingent
payment debt instruments similar to the Indexed Notes will
not differ materially from the Proposed Regulations.
Accordingly, the ultimate federal income tax treatment of
the Indexed Notes may differ substantially from that
described below.
United States Holders
The following is a summary of the principal
United States federal income tax consequences of the
ownership of Indexed Notes by United States Holders.
Under the Proposed Regulations, the Indexed Note
will be treated as a debt instrument that provides for
contingent payments, and that fails to provide for total
noncontingent payments at least equal to the issue price
of the debt instrument. The issue price of the Indexed
Note will be its stated principal amount.
All payments due under the Indexed Note will be
treated as contingent payments. In the taxable year in
which the amount of each monthly contingent payment (the
"Coupon Payment") becomes fixed (excluding the final
payment at maturity), the holder of the Indexed Note must
include in its gross income that portion of the payment
treated as interest deemed accrued under the Proposed
Regulations. The excess of the amount of a Coupon
Payment, if any (excluding the final payment at maturity),
over the interest deemed accrued for the current and all
prior accrual periods must be treated as a repayment of
principal, and will reduce the holder's basis in the
Indexed Note. Interest deemed accrued is calculated for
each monthly accrual period. For the first accrual
period, the interest deemed accrued will be equal to the
product of the issue price of the Indexed Note and the
Applicable Federal Rate, determined on issue date to be
3.94 percent, compounded monthly. For each subsequent
accrual period (excluding the final accrual period ending
on the maturity date) the issue price will be the sum of
the issue price at the beginning of the immediately
preceding accrual period and the interest deemed accrued
during that period, less the total amount of all payments
due during the immediately preceding accrual period. The
interest deemed accrued for each subsequent accrual period
will equal the product of this adjusted issue price and
the Applicable Federal Rate determined on issue date.
At maturity, the holder will compare the total
amount paid at maturity under the terms of the Indexed
Note (including the amount of the Coupon Payment component
of the final payment, if any) with the outstanding
principal balance of the Indexed Note at maturity (reduced
by the amount, if any, of the excess of Coupon Payment
over interest deemed accrued for any prior monthly accrual
period). To the extent that the amount paid at maturity
exceeds the outstanding principal balance of the Indexed
Note, the holder will treat the excess as interest income
includable in gross income by the holder. To the extent
that the outstanding principal balance of the Indexed Note
exceeds the final payment at maturity, the holder will
recognize capital loss, deductible currently in the case
of a corporate holder to the extent of capital gains, and
in the case of a holder other than a corporation, to the
extent of capital gains plus the lower of $3,000 or the
excess of capital losses over capital gains.
Because the holder may select a new Index prior
to the start of any Calculation Period throughout the term
of the Indexed Note, which selection will affect the
holder's yield under the Indexed Note as well as the
Maturity Amount, the Internal Revenue Service could argue
that each selection of a new Index will constitute a
material modification of the terms of the Indexed Note and
a deemed taxable exchange. In this instance the holder
would recognize gain or loss equal to the difference
between its basis in the "old note" and the issue price of
the "new note." It is unlikely, however, that the
Internal Revenue Service would, first, take such a
position, and second, prevail in such position, if taken.
While there is no law directly addressing the issue of
whether a unilateral change in selection of an index such
as that provided for under the terms of the Indexed Note
by a holder of such a note would constitute a material
modification of the note, an analysis of existing law and
Proposed Regulations issued by the Internal Revenue
Service relating to modifications of debt instruments
(effective for modifications made on or after the date
that is 30 days after publication of the final regulations
in the Federal Register) strongly support the conclusion
that a unilateral alteration in the payment terms of a
debt instrument by a holder of the instrument that occurs
by operation of the original terms of the instrument will
not be considered a modification of the instrument.
Non-United States Holder
For the U.S. taxation treatment of the Indexed
Notes for non-United States holders, see the description
under "United States Taxation" in the Prospectus and
Prospectus Supplement to which the Pricing Supplement is
attached.
