The Astrea 7 Private Equity Bonds is the latest in a series of private equity bonds offered by Azalea Asset Management, a subsidiary of Temasek Holdings. This comes on the back of three previous issues – Astrea IV PE Bonds in 2018, Astrea V PE Bonds in 2019 and Astrea VI PE Bonds in 2021.
These bonds are one of the few investment vehicles that allow all retail investors in Singapore to gain easy access to private equity investments – albeit a bond exposure rather than equity. Nevertheless, the bond will be backed by cash flow from a diversified portfolio of private equity funds.
Astrea 7 PE Bonds is currently offering $280 million for its Class A-1 bonds and US$100 million for its Class B bonds for retail investors. Here are 10 things we need to know before investing.
#1 Retail Investors Can Invest In Class A-1 And Class B Bonds (But Not Class A-2 Bonds)
There are three classes of bonds offered by Astrea 7 – the Class A-1, Class A-2 and Class B bonds. Astrea 7 represents the first time that retail investors can invest in its Class B bonds.
In previous Astrea IV, V and VI, the Class B bonds were only offered to institutional or accredited investors. While retail investors still cannot invest in the Class A-2 bonds, it is not a big miss as it ranks equally with Class A-1 bonds as the most senior class of bonds.
The Class A-1 bonds rank senior to Class B bonds, making it less risky. This means the Class B bonds have a higher credit risk profile as interest payments will only be made after Class A bonds are paid.
Class A-1 bonds also have a mandatory call in 5 years. This is when the bonds must be called if certain pre-determined conditions are met. The Class B bonds have a mandatory call in 6 years.
Class B bonds are also denominated in US Dollars, while the Class A-1 bonds are in Singapore Dollars.
#2 What Is The Interest Rate We Will Receive When Investing In Astrea 7?
In general, the higher the risk we take, the higher the interest rate we receive. Hence the Class B bonds provide a higher interest return compared to the Class A-2 bonds.
| Bonds | Public Offer
(Size) |
Expected Ratings | Interest Rates | Maturity |
| Class A-1 | S$280 million
(S$526 million) |
A+sf (Fitch) A+ (sf) (S&P) |
4.125% p.a. | Scheduled: 27 May 2027 Legal: 27 May 2032 |
| Class A-2 | –
(US$175 million) |
Asf (Fitch) | 5.35% p.a. | Scheduled: 27 May 2027 Legal: 27 May 2032 |
| Class B | US$100 million
(US$200 million) |
BBB+sf (Fitch) | 6.0% p.a. | Scheduled: 27 May 2028 Legal: 27 May 2032 |
For retail investors, if the Class A-1 or Class B bonds are not redeemed by their respective scheduled dates in 5 years, there will be a one-time 1% step-up in interest rates. This means the Class A-1 bonds will have an annual interest rate of 5.125%, while the Class B bonds will have an annual interest rate of 7.0%.
We will receive our interest payments on a semi-annual basis, on 27 May and 27 November each year.
#3 Will You Receive US Dollar Interest Payments If You Invest In Class B Bonds?
Those who are familiar with previous Astrea private equity bonds will know that interest payments are made in Singapore Dollar.
Since Class B bonds are offered for the first time, and denominated in US Dollars, there may be a question about the currency of the interest payment we get. Both interest and principal payments will be made in US Dollars for holders of Class B bonds. If we hold our Class B bonds within CDP, we can apply for the Direct Crediting Service to receive Singapore Dollar payments. The exchange rate will be provided by CDP’s partner bank.
We can also opt out of receiving our interest payments in Singapore Dollar, via CDP Internet. If we do this, our interest payments will not be converted from US Dollars, and will remain as cash balance with CDP. A telegraphic transfer fee will be imposed by CDP (in addition to any other charges by your bank) when a transfer is made.
Read Also: Step-By-Step Guide To Opening A CDP Account In Singapore
#4 Is This A Good Interest Rate In Today’s Landscape?
For starters, the interest rates that Astrea 7 is paying on the Class A-1 and Class B shares are higher than when the Astrea VI PE Bonds were issued in early 2021. However, this might be expected as the interest rate environment is rising and the world is in a slightly more unpredictable phase.
We can also compare interest rates of Astrea 7 PE Bonds compared to what the previous Astrea bonds are currently trading at. Even though retail investors could not invest previously, the Class B bonds were offered to certain institutional and accredited investors.
When looking at the interest rates, we also have to understand that the earlier Astrea bonds are nearer their scheduled and legal maturity dates, which would lower their risks as well.
| Astrea Private Equity Bonds | Interest Rates When First Issued | Interest Rates Today (Based On Bond Prices) |
| Astrea IV PE Bonds (Class A-1) |
4.35% | 2.345% |
| Astrea IV PE Bonds (Class B) |
6.75% | 4.208% |
| Astrea V PE Bonds (Class A-1) |
3.85% | 3.565% |
| Astrea V PE Bonds (Class B) |
5.75% | 5.474% |
| Astrea VI PE Bonds (Class A-1) |
3.00% | 3.436% |
| Astrea VI PE Bonds (Class B) |
4.35% | 5.848% |
| Astrea 7 PE Bonds (Class A-1) |
4.125% | – |
| Astrea 7 PE Bonds (Class B) |
6.0% | – |
Source: Interest rates today determined by Yield to Worst figures by Bondsupermart
We could also compare the interest rates to benchmarks for risk-free interest rates such as the Singapore Savings.
As we can see, while the Astrea 7 Class A-1 bonds are paying a higher interest rate than Astrea VI Class A-1 bonds, its premium to the risk-free rate (represented by the SSB) is actually lower.
| Astrea Series (Class A-1 bonds) | Returns when first issued | Average returns of SSB when the bond was issued | Premium to SSB rate |
| Astrea IV PE Bonds | 4.35% p.a. | 2.43% | 1.92% |
| Astrea V PE Bonds | 3.85% p.a. | 2.13% | 1.72% |
| Astrea VI PE Bonds | 3.00% p.a. | 0.97% | 2.03% |
| Astrea 7 PE Bonds | 4.125% | 2.53% | 1.595% |
Source: Interest rates taken from the Singapore Savings Bonds (SSB) website
Read Also: [2022 Edition] Complete Guide To Buying Singapore Savings Bonds (SSB)
#5 Is This Interest Rate Guaranteed?
Investors should also have grown more familiar with the Astrea series of private equity bonds since it was first offered to the public in 2018. The interest payments for the Astrea 7 bonds are backed by cash flows from its underlying private equity funds.
They are not backed by Azalea Asset Management, that indirectly owns Astrea 7. Interest payments are also not backed by Temasek Holdings, that indirectly owns Azalea Asset Management.
#6 How Safe Is The Interest Payments For Astrea 7 Investors?
There have been three previous launches in the Astrea series of private equity bonds offered to retail investors. These previous issues have been making steady repayments. Thus, we can observe that they are well managed and well structured.
Next, we can look at the underlying assets that back our interest payment. Astrea 7 is backed by 982 investee companies within 38 PE funds. These PE funds are managed by diverse basse of private equity managers, such as Warburg Pincus, KKR and Permira. The total portfolio is worth a combined US$1.9 billion.
Source: Astrea 7 Prospectus
The PE funds are also spread across the US, Europe and Asia, ensuring less geographical risk. The portfolio is also exposed to diverse business sectors, including IT, Healthcare, Consumer Discretionary, Industrials, Financials, Communications Services and more.
Source: Astrea 7 Prospectus
The funds within Astrea 7’s portfolio recorded a portfolio profit for the initial period 30 November 2021, and received a net cash distribution of around US$80 million.
Furthermore, there are in-built safeguards within the structure of the bonds. Firstly, there is a cash build-up strategy that is put aside to redeem the Class A and Class B bonds on their scheduled call dates. Next, once the portfolio is no longer worth double of bondholders’ investment, a safety mechanism is triggered to channel all cash flows to the Reserves Accounts. Finally, since investing in PE may result in lumpy cash flows, there is also a credit facility to top-up any shortfalls in the near-term to make the interest payments to bondholders.
Source: Astrea 7 Prospectus
Fitch and S&P have given the bonds investment grade ratings. Astrea 7’s Class A-1 bonds is rated A+sf by Fitch and A+ (sf) by S&P, while its Class B bonds are rated BBB+sf by Fitch.
#7 How To Invest In Astrea 7 PE Bonds IPO?
Subscription for the Astrea 7 PE bonds open on 20 May (Friday), and closes on 25 May (Wednesday) 2022.
| Timetable of Offer | |
| Opening date and time | 20 May (Friday) at 9 a.m. |
| Closing date and time | 25 May at 12 noon |
| Start trading on SGX | 30 May at 9 a.m. |
Those keen to invest in the Astrea 7 Class A-1 and Class B bonds can do so via the following methods:
- ATMs (DBS, OCBC and UOB)
- Internet Banking (DBS, OCBC and UOB)
- Mobile Banking (DBS and UOB)
We can apply for both Class A-1 and Class B bonds separately.
#8 What Is The Minimum Investment Amount If We Want To Buy Astrea 7 PE Bonds?
For investors who want to buy Class A-1 bonds, we need to apply for a minimum of $2,000, and in multiples of $1,000.
Investors who want to buy the Class B bonds will need to apply for a minimum of US$2,000, and in multiples of US$1,000. Investors will pay for the Class B bonds in Singapore Dollars at a fixed exchange rate of $1,386.60 for each US$1,000 principal amount. Unsuccessful applicants will get back our Singapore Dollars at the same exchange rate.
A non-refundable administrative fee of $2 is payable for each application we make.
#9 What Is Your Chances Of Successfully Buying The Astrea 7 PE Bonds At IPO?
The success rate will typically depend on demand. In the past, Astrea bonds have been very well-received and demand has been high. The same may be the case for this round, especially since Class B bonds are also being issued.
Astrea 7 plans to also allocate at least some part of the applications for investors who apply for less than $50,000 for Class A-1 bonds and USS$50,000 for Class B bonds.
For those who apply for more than $50,000 or US$50,000 respectively, successful applicants will be allotted in full or in part – which means there may be unsuccessful applicants.
#10 How Liquid Will The Astrea 7 PE Bonds Be Once They List On SGX?
We can take reference of the liquidity of Class A-1 bonds from their trading volume on SGX. For example, based on Friday’s trading volume, Astrea IV, V and VI are the top three highest traded retail bonds.
For Astrea 7’s Class A-1 bonds, the ticker code to look out for will be V7AB, while its Class B bonds has a ticker code of V7BB.
Read Also: 4 Things To Know About The New SINGA Bonds Issued By MAS
The post Astrea 7 Bonds: 10 Things Investors Need To Know About This Private Equity Bond (Offering Up To 4.125% And 6.0% Interest) appeared first on DollarsAndSense.sg.
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