ME Bank's latest securitisation deal is one of the most complex residential mortgage-backed securities structures put together by a small Australian issuer, reflecting the lengths to which financial institutions must go to meet the demands of different investor groups in the current market.The A$1 billion SMHL Securitisation Fund, which was priced on Friday, includes a short-term US dollar floating rate tranche with a put option, and a fixed-rate tranche with controlled amortisation.ME Bank's chief financial officer, Nick Vamvakas, said bank executives started talking about the structure of the deal with NAB's securitisation team last year. In January, an ME Bank executive went to the US with NAB to meet investors. The US$420 million A1 tranche was designed for US investors looking for short-term paper. The tranche has a weighted average life of 0.9 of a year.It has been sold on a floating rate, priced at 40 basis points over Libor. Vamvakas said that when that part of the transaction is swapped back into Australian dollars the pricing will be around 120 basis points over the bank bill swap rate.The first tranche of notes matures in 12 months but can be rolled over for another 12 months. Investors will have the option of putting them back into NAB on the first anniversary.The A$50 million A2 tranche was designed for a single investor. Pre-payment of mortgages in the tranche will be controlled so that amortisation over the three-year term is predictable. ME Bank is paying a fixed rate of 5.27 per cent on the A2 tranche.The A$477.5 million A3 tranche has a conventional structure. ME Bank will pay 150 basis points over the 30-day bank bill swap rate on notes that have a weighted average life of 2.8 years.This pricing is 25 basis points higher than the price ME Bank paid for similar notes in its last RMBS deal, which was in October.Vamvakas said a surprising feature of the deal was that all the AB and B notes were sold. The $46 million AB tranche was priced at 265 basis points over swap; pricing of the $25 million of B notes was not disclosed.Vamvakas said: "Financial planners sold those notes to self-managed superannuation funds and high net-worth individuals."This was new for us and the distribution was independent of our dealer panel. These were investors and small super fund trustees buying in $500,000 lots."His biggest disappointment was investor participation in the A3 tranche. Among the 10 investors who bought notes there was a very small volume allocated to fund managers. The Australian Office of Financial Management bought $123.5 million of the A3 notes.Vamvakas said he was encouraged by the response of US investors and saw potential to tap that market again. He was not so sure about the small super funds. "Each purchase is small and you need large numbers to make it work. We don't really know much about the depth of demand."The average cost of the deal overall was around 150 basis points over the bank bill swap rate. "That is