Launch of Astrea V Secured Fixed Rate Bonds

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Update (11 June 2019): The preliminary pricing for Astrea V is out. At 3.85%, it’s lower than last year’s 4.35%, which I suppose is fair since interest rate expectations have come down quite significantly since. Check out the more detailed review on it here.


Astrea V Pte. Ltd. (the “Issuer” ) and Azalea Investment Management Pte. Ltd. (“Azalea”) today announced the launch of the Astrea V PE Bonds, the second private equity bonds to be listed on the Singapore Exchange with a retail tranche. The Issuer is offering S$180 million of Class A-1 Bonds at a fixed interest rate of 3.85% per annum, for subscription by the public in Singapore (“Public Offer”).

The Public Offer follows the successful placement of S$135 million of the Class A-1 Bonds, US$230 million Class A-2 Bonds and US$140 million Class B Bonds to institutional investors and accredited investors, which concluded earlier today. The placement tranche saw strong demand across all classes of bonds, with a combined placement orderbook in excess of US$3.4 billion equivalent from over 189 accounts.

The Public Offer will open from 9.00 am tomorrow (12 June) and will close at 12.00 pm on 18 June 2019. Credit Suisse (Singapore) Limited, DBS Bank Ltd. and Standard Chartered Bank (Singapore) Limited are the Lead Managers and Underwriters for the Astrea V PE Bonds offering.

Azalea will also be conducting three public presentations for investors to understand the Astrea V transaction, and would like to invite you to attend it. The details are as follows:

Date / DayTimeVenue
14 June 2019, Friday6.30pmDBS Auditorium, MBFC Tower 3

 

15 June 2019, Saturday9.00amDBS Auditorium, MBFC Tower 3

 

17 June 2019, Monday6.30pmSGX Centre

 

 


 

I was really excited by last year’s Temasek’s Astrea IV Bonds. In fact, since this site was created, the 2018 Astrea IV Bonds was the only investment to have ever received a full 5/5 Financial Horse Rating. That’s how much I like them.

Of course, because of their red hot popularity, everyone who applied only received a miserable S$4000 allocation, myself included.

So imagine my surprise when I was given a heads up that there will be a new round of Astrea bonds coming, Astrea V! I knew that there was a lot of talk about a new round of Astrea bonds, but still, this was like Christmas come early.

The preliminary prospectus was just lodged on MAS OPERA (available here). I had a quick flip through and it looks like the structuring is highly similar to that of Astrea IV, which is a good thing because Astrea IV’s structuring was iron clad (in a good way).

Pricing isn’t out yet (we’ll need to wait for the registered prospectus for that), so it remains to be seen what the yield for these Astrea V bonds will be. If the global macro environment is anything to go by, it’ll probably be a bit lower than last year’s 4.35% given how much yields have come down since then. But we’ll see.

I’ll save my full judgment until the registered prospectus and pricing is out. But in the meantime, here’s some of the information that is available:

Astrea V Pte. Ltd. is offering the Astrea V Private Equity (PE) Bonds, backed by cash flows from a diversified portfolio of private equity funds. A copy of the preliminary prospectus in relation to the offer has been lodged with the Monetary Authority of Singapore (MAS) today. Further details of the offer will be available when the final prospectus is registered with the MAS at a later date.
Three classes of bonds will be issued: Class A-1 Bonds, Class A-2 Bonds and Class B Bonds. Of the three classes, a portion of the Class A-1 Bonds will be offered to the public in Singapore, making it the second listed retail PE bonds that give retail investors exposure to PE, after Astrea IV last year. The Class A-2 and Class B Bonds will be offered to institutional and accredited investors only.
Astrea V is sponsored by Astrea Capital V Pte. Ltd., an indirect wholly-owned subsidiary of Azalea Asset Management, which in turn is a wholly-owned subsidiary of Temasek. The offering of the Astrea V PE Bonds represents a continuing step by Azalea to bring retail investors in Singapore closer to private equity through listed retail PE bonds.

Are you equally excited about these bonds? Share your thoughts in the comments section below, I respond personally to all comments! 


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25 COMMENTS

  1. I have also just caught wind of this, and am eagerly awaiting the prospectus. Like you, I got a measly 4000 bucks on the previous offering. If it is anywhere near as sound as the previous one, I’ll be getting my hat in the ring. With much hope that the offering this time will be more sizeable than the previous.

    • Agreed! If the yield is anywhere near the previous one, and given how structurally sound these things are likely to be, I’ll probably be applying for as much as I can get my hands on.

  2. Hi FH.
    I didn’t apply for IV trench because I don’t think I will be allocated a “meaningful” amount. Initially I though maybe apply for $50K to $100K. But I change my mind to skip it altogether after reading the press conference which seems to be targeting the man-on-the-street. Probably everyone gets a few $K and that’s it. On hindsight, I would have gotten at most a miserable $5K to $7K.
    I was also concern about the liquidity when I need to sell. Even though its TH (marketing), it was not guaranteed by TH or anyone. Things can still happen in another worst financial crisis although I think the likelihood of losing every thing is very low but that some funds may go burst is possible. Very hard to assess this aspect, And 5 years is not a short time if there is poor liquidity.
    And didn’t like the opaqueness of the funds. What’s inside the funds? Any derivatives or leverage or some toxic stuff that no one can understand? I am not implying that there is but not knowing the details makes people uncomfortable.
    I am not bother about the credit rating, some BS stuff. I was working in the US when Lehman collapse and it had left a very deep impression after that eventful morning. Wow how can a AAA few hundred years old bank collapse just like that? I was watching all my colleagues’ depressed and disbelief faces and sighing for a few weeks.
    For this trench, I am still wondering because I expect the coupon rate to be even lower, maybe 4% or slightly lower. Worth it? Maybe?

    • Above are just my thoughts after some really rocky points in 30 years of investment journey. No offense and no one has to agree with me.

    • Hi Retired Uncle,

      Thanks for sharing your thoughts. Really appreciate it, and I can absolutely see where you’re coming from.

      To be honest, I agree with you on the allotment sums, the liquidity and the opaqueness of the funds. Like you, I’m also expecting a 4% or sub 4% yield on these things.

      Ultimately though, I think it’s also a question of if we dont invest in these bonds, where do we invest the money? With blue chips REITs like CMT/MCT yielding about 4.5% these days, I don’t think they’re attractive. SSBs have come down quite significantly, and the 5 year return is about 1.96% p.a. these days. So if these bonds are going to come out at a 4% yield, with the structural safeguards in place to reduce default risk, I think they could be an interesting alternative place to park 4 or 5k.

      But again, it’s all about risk-reward, and while I think they may be attractive, I may not be right on this. We’ll have a closer look at these things when the pricing is out, and I would absolutely love to hear any further thoughts you may have.

      Cheers!

  3. I hear it is about high 3% to low 4%.

    Worth the investment judging by the previous tranche in terms of trading liquidity and now trading at 1.07….major caveat being all things the same as the previous tranche.

    Will definitely aim for the private placement for the S$.

    Thanks for the write up and i enjoy reading your following your blog.

    Keep up the good work!

    • Thanks for the kind words!

      Yeah, if its high 3% to low 4% I’ll probably pick some up as well, given that the structural safeguards in place reduce the default risk quite drastically. Unfortunately we’re not likely to get much in the public tranche though, so yeah if you get the private placement you should absolutely go for it.

  4. If I have the capacity to invest in any of the tranches, think A2 may make most sense given that it sits in the same seniority as A1 and the spread between Libor and Sibor is less likely to be less than the spread between A1 and A2

    • Hi! It hasn’t launched yet actually, so you can still get it when it opens later this month. The previous Astrea IV is trading on the open market now, so you can get it by buying on the SGX. It’s trading at 1.07 the last I checked though.

      • Thanks for the reply.
        Since it is trading on sgx, does that means there’s no limit to how much amount i can trade? What’s the difference if I apply directly when it started to waiting for it to be listed on sgx?

        Lastly, Is it easy to liquidate ?

        • Yep that’s correct, but the liquidity is poor, so it may take a while to buy the amount you want. It’s also trading at 1.07 now (IPOed at 1.00), so if you buy it on the open market the yield is much longer than if you bought at IPO.

          The liquidity is poor, so if you want to sell, you may need to queue your buy order for a while. There’s also no guarantees where the price would be want you want to sell it.

          Hope this helps! Cheers.

  5. Hi Financial Horse, I just started to look into parking my extra savings to investment and started reading on retail bonds vs equity, may I know if I would like to apply, how do I go through with this? Is it via DBS ATM when it launched?

    Apologies for the entry level questions I am asking.
    Thanks in advance.

    • Yep, you can buy them via ATMs or Internet Banking for any of the 3 local banks when they launch. It should probably launch in Mid-June.

      Cheers. 🙂

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