Similar to previous equity index-linked deals from the bank, Salomon Smith Barney continues structuring principal-protected synthetic securities for retail investors, with the advent of a triple-A wrap on the swap payment.

Salomon's most recent deal, which is currently being marketed and will close Oct. 31, will be tied to a semi-conductor index. The deal is called Tiers Principle Protected Asset-Backed Certificate Trust Series Semi-Conductor 2000-14, and is backed by a pool of triple-A rated credit-card securities. Ambac Assurance Corp. is guaranteeing the swap payment by the counterparty, in this case, Salomon Smith Barney Holdings Inc., the entity from which Salomon issues medium term notes.

As of press time, there was no word on the size of Tiers 2000-14, but a similar transaction which closed in August was $40 million in size. As with the August transaction, Tiers 2000-14 is structured such that the yearly "phantom" payments are accounted for as expenses to the swap counterparty, as opposed to income, allowing a tax deferral. Further, at maturity, the payment is considered a capital gain and not income.

Salomon has also developed a synthetic MTN program, via an entity called Structured Investment Corp. (SIC). Like the equity index-linked deals, the program utilizes a triple-A-rated pool of cards as collateral.

"We're trying to replicate what an MTN program looks like, but [SIC] is not an operating company," said Matthew Mayers, a vice president at Salomon. Mayers has played a large part in the development of both the synthetic MTN program and the index-linked securities.

"We're actually using that as something to take the place of some of the MTN programs that Salomon issues," Mayers said.

Salomon is currently working on a deal that will be marketed to Japanese investors. The deal is structured as a reverse exchangeable, where the investor takes the risk of the downside, and in return gets an above average coupon.

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