Rule 424(b)(2)
Registration No. 33-49062
NASD File No: 920701003
SECOND AMENDED PRICING SUPPLEMENT NO. 126B
Dated April 7, 1994, to Prospectus
Supplement dated July 19, 1993 and
Prospectus dated May 27, 1993.
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series D
(Floating Rate)
Due from Nine Months to 30 Years from Date of Issue
Price to Public: 100%
Agent's Commission: 0%*
Interest Rate Basis: Initial Interest Rate: see
attached
( ) Treasury Rate Original Issue Date: 7/30/93
( ) LIBOR - 3 month Maturity Date: 8/7/95
( ) Commercial Paper Rate Maximum Interest Rate:_____%
( ) Federal Funds Effective Rate Minimum Interest Rate:_____%
( ) Prime Rate Spread Multiplier: _____%
( X ) Other (see below) Spread (+ -) ___________
Index Maturity: not applicable
Interest Payment Period: see attached
monthly, quarterly or semi-annually
Interest Reset Dates: see attached
Interest Determination Dates: see attached
Interest Payment Dates: see attached
The aggregate principal amount of this offering is $25,000,000
and relates only to pricing Supplement No. 126B.
THE 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.
* The Agent will not receive any commission from Lehman
Brothers Inc. or otherwise for facilitating the placement of the
Note. The Agent is receiving a fee from an affiliated entity
which is entering into a related transaction in connection with
the issuance of the Note.
I. General
Capitalized terms used herein are defined below or in
the Prospectus Supplement dated July 19, 1993 or the Prospectus
dated May 27, 1993, of which this Pricing Supplement forms a
part.
Interest
Interest on an Index 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 September 8, 1993. Interest on an Index 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) July 30, 1993 and shall end on (and
include) August 31, 1993.
The amount of interest to be paid on an Index 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 an Index Note by the Total
Return for the relevant Interest Payment Period plus (b) any
relevant Coupon Value and (ii) zero; provided, however, that, for
purposes of calculating the amount of interest to be paid on an
Index Note on the initial Interest Payment Date, the product of
an adjusted London-Interbank Offered Rate for deposits in U.S.
dollars for six calendar days determined through the use of
straight line interpolation by reference to available rates for
the next shorter and next longer periods of time multiplied by
6/360 shall be added to the amount calculated in (i) above.
Maturity Amount
The amount payable at Maturity in respect of the final
Interest Payment Period and the principal amount of the Index
Notes (the "Maturity Amount") will be the amount determined by
multiplying (i) the principal amount of the Index Notes by
(ii) the amount determined by deducting .31% from the Final Total
Return. The "Final Total Return" will be the sum of the Final
Index Returns 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 will be determined based on the
following formula:
SW x [(BP2/ABP1) x (FX1/FX2)]
<PAGE>
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 the first Business Day of that
Interest Payment Period. 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 made on the Index Notes, and, if an
interest payment has not been made, the Bond Price as of the
first Business Day of the initial Interest Payment Period;
(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 made on the Index Notes in respect of
that immediately preceding Interest Payment Period, the
Adjusted Bond Price of any Bond 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 Selection Weights of a Bond
Selection) from the Aggregate Bond Selection for the
immediately preceding Interest Payment Period and an
interest payment was not made on the Index Notes in respect
of that immediately preceding Interest Payment Period, the
Adjusted Bond Price of any Bond in the new aggregate
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 Index Notes,
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 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
basis will be divided by two
SW = the Selection Weight of that Bond in respect of such
Bond Selection
NRA = the principal amount of the Index 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 Business Day in
London 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 the 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
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, times (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 the
forthcoming 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 current
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 a
LIBOR Index a proportion of the principal amount of the Index
Notes 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 Index Notes 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 Index
Notes; 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 minimum denomination of the Index Notes will be
$25,000,000.
II. OTHER CONSIDERATIONS
Risks Associated with Payments of Interest on the Index
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 Index 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 Index 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.
INFORMATION REGARDING THE AGENT
The Agent will not receive any commission from Lehman
Brothers Holdings Inc. for facilitating the placement of the
Index Note. The Agent is receiving a fee from an affiliated
entity which is entering into a related transaction in connection
with the issuance of the Index Note.
SUPPLEMENTAL UNITED STATES
FEDERAL INCOME TAX DISCLOSURE
The following summary describes certain United States
federal income tax consequences of the ownership of Index 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, its deals only with Index 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 Index 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 Index 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 Index
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 Index 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 Index Notes under the
Proposed Regulations, that the Index Notes should be treated as
debt of the Company for federal income tax purposes. The Company
intends to treat the Index 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 Index Note will not be
bound by the characterization of the Index Notes as debt by the
Company, if the holder discloses on its tax return that it is
treating the Index Notes in a manner inconsistent with the
characterization of the Index 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 Index 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 Index Notes. Furthermore,
there can be no assurance that the final Treasury Regulations
relating to contingent payment debt instruments similar to the
Index Notes will not differ materially from the Proposed
Regulations. Accordingly, the ultimate federal income tax
treatment of the Index 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 Index
Notes by United States Holders.
Under the Proposed Regulations, the Index 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 Index Note will be its stated
principal amount.
All payments due under the Index 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 Index 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 Index 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 Index Note and the Applicable
Federal Rate, determined on issue date to be 3.88 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 Index Note (including the
amount of the Coupon Payment component of the final payment, if
any) with the outstanding principal balance of the Index 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 Index 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 Index 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 Index
Note, which selection will affect the holder's yield under the
Index 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 Index 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 Index 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.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will
apply to certain payments of principal and interest made to
United States Holders of Index Notes other than certain exempt
recipients (such as corporations). For information reporting
purposes, the Company will treat the Proposed Regulations as if
they were currently in effect. Consequently, interest deemed
accrued, to the extent paid, as well as gross proceeds on the
disposition of the Index Note will be reported to the IRS and to
United States Holders who are not exempt recipients. A 31
percent backup withholding tax will apply to such payments if the
United States Holder fails to provide a taxpayer identification
number or certify other exempt status or fails to report in full
dividend and interest income.
NON-UNITED STATES HOLDER
For the U.S. taxation treatment of the Index 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.
