Home REIT & Fixed Income Astrea 7 Bonds Balloting Results! – Nobody wants Class B at 6%...

Astrea 7 Bonds Balloting Results! – Nobody wants Class B at 6% yield?

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Astrea 7 Bonds balloting results are out!

And I must say, I was actually pretty surprised by the balloting results.

Astrea 7 Bonds Balloting Results

To sum it up, the:

  • Astrea 7 Class A-1 Bonds was 3.1 times subscribed
  • Astrea 7 Class B Bonds was 1.3 times subscribed

And the balloting results are:

  • Class A-1 – Anyone applying S$9,000 and below gets full allocation
  • Class B- Anyone applying US$25,000 and below gets full allocation

Full balloting results for Astrea 7 set out below.

Why is demand for Astrea 7 so lukewarm?

It’s quite clear from the balloting results that the reception for Astrea 7 is quite lukewarm.

You can’t even blame it on the issue size, because Astrea 7’s S$280 million public offer is only slightly higher than Astrea IV’s $250 million public offer.

I would have thought that the higher yield on Astrea 7 would have contributed to greater investor interest, but clearly I was wrong on this.

Based on my anecdotal checks, it seems that everyone only wanted the “safer” SGD tranche as a safe place to park their cash, and didn’t want the supposedly “riskier” Class B tranche which also comes with USD forex risk.

Some other possible reasons – Could it be that retail investors are starting to prepare for a possible recession and holding more cash?

Or do they find the yield is too low for the high inflation environment we are in, with rising interest rates?

Are REITs a better buy in this climate, offering more upside potential?

Whatever the case, with this showing for Astrea 7, and some other recent REITs rights issues (Lendlease REIT being a notable one), it seems that retail investor risk appetite in the current market is very poor.

This is not a good time to be raising funds.

Why is demand for Astrea 7 Class B so terrible?

This was especially true for Class B, where anyone applying US$25,000 and below gets full allocations.

And the public offer only being 1.3x subscribed is frankly quite a terrible showing.

As shared in my recent article, after reflecting over it I actually thought Class B offered a more attractive risk-reward profile, for investors who are able to stomach the risk.

You’re essentially taking on a broadly similar macro risk, for a significantly higher yield (almost 50% higher).

In any case, I put my money where my mouth is – and I applied for a higher amount of Class B rather than Class A Astrea 7 Bonds.

I received decent allocations for both as well.

Whether this turns out to be a good investment after all, we’ll find out!

Whatever the case, I would be really interested to see how Astrea 7 is priced on the open market once trading starts on Monday at 9am!

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