In collaboration with its European arm, last week Salomon Smith Barney brought its $2.2 billion Holmes Financing No. 1, a residential asset-backed deal made up of mortgages originated in the United Kingdom.

The deal, which featured a multi-part soft bullet structure, was sold simultaneously to investors in Europe and the U.S.

Being hailed as the largest-ever European mortgage securitization, the loan pool is made up of 128,000 first-tier residential mortgages located in England and Wales. The originator/issuer is U.K. building society Abbey National.

The Holmes deal is structured similarly to the $1.2 billion Mound Financing No. 1, which closed earlier this year, said William Grady, managing director and co-head of global asset-backed and mortgage finance at Salomon.

Though Mound was the blue print for Holmes Financing, there are some major differences in the deals. Mound was smaller in size, sold as a 144A, and denominated in U.S. dollars only.

"The Holmes transaction was truly a global offering, in the sense that there were two U.S. dollar tranches, which were sold as U.S. publicly registered deals," Grady said.

In addition to the three-year and five-year floating-rate series that are U.S. dollar denominated, the trust issued two additional series: one floating-rate with both euro and sterling denominated classes, and one sterling denominated series, with both fixed- and floating-rate classes.

Holmes Funding is part of the overall trend of globalization, market sources say - as investors are craving portfolio diversity.

"If you look at it from an investor standpoint on the U.S., for someone whose been buying soft bullets on a credit-card basis, this creates an interesting diversification play," Grady said. "If you're interested in similar credit exposure, it's an opportunity to diversify out of the large credit-card issuers and into the U.K. residential mortgage market."

Though Salomon structured and led the deal, eleven other syndicate desks were brought in on the issuer's insistence, including Credit Suisse First Boston, Merrill Lynch, Deutsche Bank, J.P. Morgan and Warburg Dillon Read.

The first series of notes was split into three tranches. A 2.97-year, $900 million triple-A-rated A-class priced at 14 basis points over the three-month Libor. A 3.22-year, $31.5 million B-class - rated AA by Standard & Poor's and Fitch and Aa3 by Moody's Investors Service - priced at 38 over the three month Libor. The 3.25-years, $42 million, triple-B-rated C-class priced at 103 over the three month Libor.

The second series of notes was also split into three tranches with identical ratings to the three-year maturity notes. The 4.98-year, $975 million senior A-notes priced at 19 over three-month Libor, while the 5.23-year, 34.5 million B-class notes priced at 41 over. The 5.23-year, $45 million C-class notes priced at 115 over.

Series three (also with identical class-by-class ratings) included a 6.98-year, GBP375 million A-class which priced at 26 basis points over the sterling three-month Libor, and a 6.98-year EURO320 million A2-class that priced at 26 over the euro three-month Libor. The 7.23 year GBP24 million B-class priced at 45 over the sterling three-month Libor, while the 7.23-years GBP30 million C-class priced at 160 over the sterling three-month Libor.

Series four (again, same ratings) included a fixed-rate 9.98-year, GBP250 million class-A that priced with a coupon of 6.62%. The GBP11 million 10-year B-class priced at 62 over the sterling three-month Libor. A 10-year, GBP14 million priced at the sterling three-month Libor plus 175.

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