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The U.S. financial crisis is not only showing no signs of abating, it seems to be getting worse as Lehman Brothers is still struggling to find a buyer, and AIG, which until recently was the world's largest insurance company, has seen its stock tank by over 30% at the end of last week.

The question is how much Israelis should worry about the latest revelations - and problems.

It turns out that Israelis who invested in two structured products issued by the Excellence investment house three years ago, and still being traded today on the Tel Aviv Stock Exchange, have an NIS 400 million exposure to Lehman Brothers.

The series are the Keshet and Matbeot Olam (World Currencies) bonds issued by Excellence, which are both backed by the assets of Lehman's German subsidiary Lehman Brothers Bankhaus.

The Keshet bondholders bought their bonds from a single purpose entity of Excellence Underwriting and the Xpert Financial Group, which raised NIS 350 million from the public and invested it all in Lehman Bankhaus. Lehman's payments are backed by the commitments of some 100 companies to Lehman. The bonds are due in 2011 with quarterly interest payments, and while a failure or fire sale of Lehman could cause a default of the bonds, such a situation may not necessarily occur.

Matbeot Olam is a similar product, with an NIS 400 million note and 8.75% interest payments with a repayment date of March 2010. This product is based on the performance of various currencies against the dollar.

Most of the buyers of these bonds products - and who are exposed to a Lehman collapse - are institutional investors, who hold them mostly in their mutual and provident funds, though some may hold several bonds for their own trading account. The general public does not directly participate significantly in such issues - except through its holdings in the various funds.

As of the end of June, some 45 mutual funds held NIS 48 million in the Matbeot Olam bonds, according to Kranot Meda Zahav, an independent firm that evaluates mutual funds.

In addition, 10 pension funds are invested in the products.

Such structured products were issued by the dozens a few years ago, both to the public and for private placements with institutional investors, since the products seemed more attractive at the time: before the global credit crisis. The structured products paid higher interest and had higher credit ratings than other offerings at the time - seemingly ignoring the risks involved, but with the approval of the Israel Securities Authority.