FWP 1 a07-17853_42fwp.htm FWP

Filed Pursuant to Rule 433
Registration No. 333-134553

Preliminary Note Terms

2YR CMS Spread Range Accrual

Lehman Brothers Holdings Inc. has filed a registration statement (including a prospectus) with the U.S. Securities and Exchange Commission (SEC) for this offering. Before you invest, you should read the prospectus dated May 30, 2006, the prospectus supplement dated May 30, 2006 for its Medium Term Notes, Series I, and other documents Lehman Brothers Holdings Inc. has filed with the SEC for more complete information about Lehman Brothers Holdings Inc. and this offering.  Buyers should rely upon the prospectus, prospectus supplement and any relevant free writing prospectus for complete details.  You may get these documents and other documents Lehman Brothers Holdings Inc. has filed for free by searching the SEC online database (EDGAR®) at www.sec.gov with “Lehman Brothers Holdings Inc.” as a search term. You may also access the prospectus and Series I MTN prospectus supplement on the SEC web site as follows:

Series I MTN prospectus supplement dated May 30, 2006:
http://www.sec.gov/Archives/edgar/data/806085/000104746906007785/a2170815z424b2.htm

Prospectus dated May 30, 2006:
http://www.sec.gov/Archives/edgar/data/806085/000104746906007771/a2165526zs-3asr.htm

Alternatively, Lehman Brothers Inc. will arrange to send you the prospectus, Series I MTN prospectus supplement and final pricing supplement (when completed) if you request it by calling your Lehman Brothers sales representative or 1-888-603-5847.

Issuer:

 

Lehman Brothers Holdings Inc. (A1, A+, AA–)

Principal Amount:

 

TBD

CUSIP:

 

52517P2V2

Trade Date:

 

July 26, 2007

Issue Date:

 

July 31, 2007

Maturity Date:

 

July 31, 2009

Redemption Price:

 

100.0%

Interest Rate:

 

[5.85]% to [6.15]% x Interest Accrual Factor, subject to a minimum Interest Rate of 0.00%

Interest Period:

 

Quarterly 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)

Business Day

 

Unadjusted, modified following, 30/360

Convention /

 

 

Daycount Basis:

 

 

Interest Payment
Dates:

 

Quarterly on the last Business Day of each January, April, July and October, commencing October 31, 2007, and ending on the Maturity Date

Interest Accrual Factor:

 

For any Interest Period, the number of calendar days (including non Business Days) in respect of which SPREAD REF is greater than or equal to [0.16]% during that Interest Period, divided by the total number of calendar days (including non Business Days) in that Interest Period.

 



 

 

SPREAD REF:

 

For any day in an Interest Period (subject to the Rate Cut Off):

 

 

SPREAD REF = 10yr CMS Rate – 2yr CMS Rate

10yr CMS Rate:

 

On any Business Day during an Interest Period, the rate for U.S. Dollar swaps with a maturity of 10 years, expressed as a percentage, which appears on Reuters Screen ISDAFIX1 as of 11:00a.m., New York City time, on that day. If such rate does not appear on Reuters Screen ISDAFIX1, the rate for such date shall be determined as if the parties had specified “USD-CMS-Reference Banks” as the applicable rate, as described under “Description of the Notes—Floating Rate Notes—CMS Rate Notes” in the prospectus supplement dated May 30, 2006, for the Issuer’s Medium Term Notes, Series I.

2yr CMS Rate:

 

On any Business Day during an Interest Period, the rate for U.S. Dollar swaps with a maturity of 2 years, expressed as a percentage, which appears on Reuters Screen ISDAFIX1 as of 11:00a.m., New York City time, on that day. If such rate does not appear on Reuters Screen ISDAFIX1, the rate for such date shall be determined as if the parties had specified “USD-CMS-Reference Banks” as the applicable rate, as described under “Description of the Notes—Floating Rate Notes—CMS Rate Notes” in the prospectus supplement dated May 30, 2006, for the Issuer’s Medium Term Notes, Series I.

Rate Cut Off:

 

SPREAD REF for Saturday, Sunday or a day which is not a Business Day will be SPREAD REF for the immediately preceding Business Day. SPREAD REF in effect on the fifth Business Day prior to an Interest Payment Date will remain in effect until that Interest Payment Date.

Business Days:

 

New York

Calculation Agent:

 

Lehman Brothers Special Financing Inc.

Underwriter:

 

Lehman Brothers Inc.

Denomination:

 

US$1,000/1,000

Fees:

 

 

 

 

 

 

 

 

Price to Public (1)

Fees(2)

Proceeds to the Issuer

 

 

Per note

$1,000

$2.50

$997.50

 

 

Total

 

 

 

(1)             We are offering the notes to certain fiduciary accounts at variable prices of between $997.50 and $1,000 per note pursuant to one or more negotiated transactions, and Lehman Brothers Inc., with respect to any sales made to such accounts, will forego all or a portion of its fees.  Lehman Brothers Inc. will offer the notes to all other purchasers at a purchase price of $1000 per note.  Lehman Brothers Inc. may pay selling concessions or fees to other dealers not in excess of $2.50 per note.

(2)             The price to public includes the cost of hedging our obligations under the notes through one or more of our affiliates, which includes our affiliates’ expected cost of providing such hedge as well as the profit our affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge.

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



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” generally in the prospectus supplement dated May 30, 2006.

U.S. Federal Income Tax Treatment:

Lehman Brothers Holdings Inc. intends to treat the notes as variable rate debt instruments, as described under “Supplemental United States Federal Income Tax Consequences—Variable Rate Debt Instruments” in the prospectus supplement dated May 30, 2006, for the Issuer’s Medium Term Notes, Series I.

Historical Levels of the 10yr CMS Rate and 2yr CMS Rate

The following shows for illustrative purposes the 10yr CMS Rate and the 2yr CMS Rate in effect on the date hereof and the hypothetical historical Interest Payment Dates listed below; the Interest Rate payable on any Interest Payment Date for the Notes, however, will be determined based on the 10yr CMS Rate and the 2yr CMS Rate in effect on each day during the related Interest Period.  The historical experience of the 10yr CMS Rate and 2yr CMS Rate should not be taken as an indication of the future performance of the 10yr CMS Rate and 2yr CMS Rate during the term of the Notes.  Fluctuations in the level of the 10yr CMS Rate and 2yr CMS Rate make the Notes’ effective interest rate difficult to predict and can result in effective interest rates to investors that are lower than anticipated. In addition, historical interest rates are not necessarily indicative of future interest rates. Fluctuations in interest rates and interest rate trends that have occurred in the past are not necessarily indicative of fluctuations that may occur in the future, which may be wider or narrower than those that have occurred historically.

Hypothetical

 

 

 

 

 

SPREAD REF:

 

Interest
Payment
Dates

 

10yr CMS Rate
(in %)

 

2yr CMS Rate
(in %)

 

10yr CMS Rate –
2yr CMS Rate
(in %)

 

7/16/2007

 

5.697

 

5.365

 

0.332

 

4/30/2007

 

5.166

 

5.020

 

0.146

 

1/31/2007

 

5.345

 

5.305

 

0.040

 

10/31/2006

 

5.132

 

5.079

 

0.053

 

7/31/2006

 

5.545

 

5.408

 

0.137

 

5/1/2006

 

5.638

 

5.371

 

0.267

 

1/31/2006

 

5.040

 

4.938

 

0.102

 

10/31/2005

 

5.071

 

4.816

 

0.255

 

8/1/2005

 

4.765

 

4.415

 

0.350

 

5/2/2005

 

4.644

 

3.999

 

0.645

 

1/31/2005

 

4.514

 

3.618

 

0.896

 

11/1/2004

 

4.527

 

2.964

 

1.563

 

8/2/2004

 

4.941

 

3.049

 

1.892

 

4/30/2004

 

4.976

 

2.656

 

2.320

 

2/2/2004

 

4.553

 

2.166

 

2.387

 

10/31/2003

 

4.714

 

2.188

 

2.526

 

7/31/2003

 

5.059

 

2.103

 

2.956

 

4/30/2003

 

4.202

 

1.717

 

2.485

 

1/31/2003

 

4.415

 

2.011

 

2.404

 

10/31/2002

 

4.466

 

2.070

 

2.396

 

7/31/2002

 

5.078

 

2.666

 

2.412

 

 



 

4/30/2002

 

5.628

 

3.614

 

2.014

 

1/31/2002

 

5.744

 

3.530

 

2.214

 

10/31/2001

 

4.923

 

2.882

 

2.041

 

7/31/2001

 

5.827

 

4.310

 

1.517

 

4/30/2001

 

6.152

 

4.859

 

1.293

 

1/31/2001

 

5.964

 

5.230

 

0.734

 

10/31/2000

 

6.879

 

6.656

 

0.223

 

7/31/2000

 

7.250

 

7.104

 

0.146

 

5/1/2000

 

7.449

 

7.333

 

0.116

 

1/31/2000

 

7.519

 

7.159

 

0.360

 

11/1/1999

 

6.922

 

6.394

 

0.528

 

8/2/1999

 

6.938

 

6.341

 

0.597

 

4/30/1999

 

6.068

 

5.526

 

0.542

 

2/1/1999

 

5.502

 

5.182

 

0.320

 

11/2/1998

 

5.530

 

4.829

 

0.701

 

7/31/1998

 

6.057

 

5.876

 

0.181

 

4/30/1998

 

6.163

 

5.961

 

0.202

 

2/2/1998

 

6.036

 

5.685

 

0.351

 

10/31/1997

 

6.347

 

6.008

 

0.339

 

7/31/1997

 

6.413

 

6.027

 

0.386

 

4/30/1997

 

7.071

 

6.536

 

0.535

 

1/31/1997

 

6.839

 

6.119

 

0.720

 

10/31/1996

 

6.678

 

5.928

 

0.750

 

7/31/1996

 

7.158

 

6.440

 

0.718

 

4/30/1996

 

7.072

 

6.237

 

0.835

 

1/31/1996

 

5.979

 

5.071

 

0.908

 

10/31/1995

 

6.402

 

5.827

 

0.575

 

7/31/1995

 

6.827

 

6.063

 

0.764

 

5/1/1995

 

7.452

 

6.858

 

0.594

 

1/31/1995

 

8.004

 

7.588

 

0.416

 

10/31/1994

 

8.182

 

7.112

 

1.070

 

8/1/1994

 

7.492

 

6.256

 

1.236

 

5/2/1994

 

7.488

 

6.075

 

1.413

 

1/31/1994

 

5.931

 

4.255

 

1.676

 

11/1/1993

 

5.897

 

4.207

 

1.690

 

8/2/1993

 

6.175

 

4.341

 

1.834

 

4/30/1993

 

6.385

 

4.015

 

2.370

 

2/1/1993

 

6.701

 

4.365

 

2.336

 

11/2/1992

 

7.261

 

4.781

 

2.480

 

7/31/1992

 

7.051

 

4.584

 

2.467