Bank of Scotland launched its second RMBS, under Mound Financing (No.2); issuing US$650 million and GBP300 million floating-rate notes. The transaction is lead-managed by Citibank/Schroder Salomon Smith Barney, and once again employed the master trust structure. The transaction was issued in five tranches:

*Class A1 (rated Triple A by all three rating agencies) US$330 million priced at 3 month Libor + 16 basis points, with an average life of 2.77 years;

*Class A2 (rated Triple A by all three rating agencies) US$330 million priced at 3 month Libor + 20 basis points, with an average;

*Class A3 (rated Triple A by all three rating agencies) GBP225 million priced at 3 month Libor + 27 basis points, average life 6.02 years;

*Class B Aa3 GBP37.5 million (Aa3/AA/AA) priced at 3 month Libor + 55 basis points, average life 6.02 years;

*Class C Baa2 GBP37.5 million (Baa2/BBB/BBB) 3 month Libor + 1.65 basis points, average life 6.02 years.

The Bank of Scotland and Citibank/Schroder Salomon Smith Barney pioneered the use of the first U.K. residential mortgage-backed master trust securitization in April of last year, with Mound Financing (No.1) Plc.

While the first transaction had been extensively roadshowed, there was no specific roadshow for Mound Financing No.2. The tight pricing which Mound Financing No.2 achieved was a reflection of the work done, after the first Mound transaction, to familiarize U.S .investors with the U.K. mortgage market.

Peter Apostolicis in the syndicate desk at Citibank/Schroder Salomon Smith Barney added that both the good portfolio and spread performance of Mound over the last year helped to achieve good pricing in this latest deal. Further, Bank of Scotland had considered issuing at the end of last year; however, by waiting until the New Year, best execution levels were achieved.

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