Bank of scotland

This is Herbert Smith’s third securitisation for the Bank of Scotland this year and one of several public transactions that the firm completed for the bank at the end of February.

This particular deal stands out because it is only the fourth time that a bank has issued tier one securities and the first time Schroder Salomon Smith Barney has led such an issue.

Tier one securities are advantageous because they count as debt for tax purposes but as equity on the balance sheet.

Unlike other securities, tier one securities have procedural and regulatory requirements. The terms and conditions of the deal need to be structured carefully to satisfy two sets of criteria. The Inland Revenue must be satisfied that the securities count as debt while the Financial Services Authority (FSA) must approve the structure as equity.