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Astrea V Class A1 Bonds 3.85% p.a.
12-06-2019, 10:43 PM. (This post was last modified: 14-06-2019, 03:44 PM by dreamybear.)
Post: #1
Astrea V Class A1 Bonds 3.85% p.a.
Following the previous hugely successful Astrea IV offering ( https://www.valuebuddies.com/thread-8841.html ) ..... 

Prospectus can be downloaded via : https://www.astrea.com.sg/a5/resources/#prospectus

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Latest tranche of Astrea PE bonds opens for public subscription
Wed, Jun 12, 2019 - 5:50 AM

Singapore

THE latest issuance of private equity-backed (PE) bonds by the Azalea Group opens for public subscription today, this time with a larger retail tranche to cater for an expected strong demand.

Astrea V PE Bonds are a US$600 million offering of three classes of bonds, with a structure very similar to Astrea IV last year. The bonds are backed by a US$1.3 billion portfolio of 38 PE funds.

Retail investors may subscribe for S$180 million worth of Class A-1 bonds, with a fixed coupon of 3.85 per cent. This is more than half of the total issuance of Class A-1 bonds of S$315 million. The balance is a placement tranche of S$135 million for institutions and accredited investors......

More details : https://www.businesstimes.com.sg/banking...bscription
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13-06-2019, 10:09 PM.
Post: #2
RE: Astrea V Class A1 Bonds 3.85% p.a.
(12-06-2019, 10:43 PM)dreamybear Wrote: Following the previous hugely successful Astrea IV offering ..... 

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Latest tranche of Astrea PE bonds opens for public subscription
Wed, Jun 12, 2019 - 5:50 AM

Singapore

THE latest issuance of private equity-backed (PE) bonds by the Azalea Group opens for public subscription today, this time with a larger retail tranche to cater for an expected strong demand.

Astrea V PE Bonds are a US$600 million offering of three classes of bonds, with a structure very similar to Astrea IV last year. The bonds are backed by a US$1.3 billion portfolio of 38 PE funds.

Retail investors may subscribe for S$180 million worth of Class A-1 bonds, with a fixed coupon of 3.85 per cent. This is more than half of the total issuance of Class A-1 bonds of S$315 million. The balance is a placement tranche of S$135 million for institutions and accredited investors......

More details : https://www.businesstimes.com.sg/banking...bscription

I did not go for it. I think its over priced. 

The coupons and maturity payments are manufactured out of the proceeds of the redemption of USD$1.3 billion of PE funds to support USD$600m total bonds of which the retail tranche is USD$230. Unlike a traditional bond, you have no idea what is the business backing these cashflows and what their risks are. A 2 to 1 ratio is either attractive or not, but you have no idea.

The underlying PE funds are multi-currency, but the bonds are in SGD. So there's ccy risk.

What got the retail tranche its Asf rating is probably because priority in cash payments go to the retail tranche (hence $1.3 bill to support $230 mill). I note that in the GFC, collateralized structured obligations like this got trashed when people starting loosing confidence in the underlying securities, even those in the senior tranches like this one.

It is possible, even highly likely that these securities will pay all interest and eventually redeem fully (perhaps at the 5 year mark), but the 3.85% coupon is paltry for the degree of unknown. This is a full 50bps below ASTRA IV. Singapore Savings bonds currently start at about 1.95%. NikkoAM Investment Grade Bonds ETF net about 2.9%. CPF OA is 2.5%. If I look at fundsupermart, I see a lot of good quality investment grade bonds (with a transparent lineage) at circa 3.5% to 4%.

In case anyone thinks so, these bonds are NOT gauranteed by Temasek. They are issued by a subsidiary of Temasek and there is no obligation to rescue.

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15-06-2019, 08:12 AM.
Post: #3
RE: Astrea V Class A1 Bonds 3.85% p.a.
Is the government linked companies short of cash? After the Hyflux crash, I see more Temasek related companies hat in hand from retail investors. This never happen before if I remember correctly.

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15-06-2019, 09:14 AM.
Post: #4
RE: Astrea V Class A1 Bonds 3.85% p.a.
In order to manage/depress real estate prices, there is a concerted effort by the government to shift the investment dollars of Singaporeans away from real estate.

In order to succeed in doing so, an alternate asset class deemed suitable by investors has to be made available. With numerous cases of recent failures, stocks are often perceived by the lay-person to be extremely risky, and hence, it will not be easy for the government to promote stock ownership. It will also take too much political risk in doing so, which is unwise for a government which prides itself in being far-seeing.

Bonds are generally perceived to be safer, and provides returns that are higher than deposits and more stable than investment properties. But in an environment of cheap financing, it is usually unnecessary for stable corporate entities to borrow by issuing bonds, which cost more than banks. Hence, corporates that do issue bonds with much higher yields tend to come with a disproportionate increase in risks. Some lay-people have been caught in these. And in most cases, corporate bonds are only available to accredited investors.

So here comes the government. Singapore Saving Bonds, proposed bond financing of future government infrastructure projects, and bonds issued by Temasek-linked entities. These are not coincidental. Because these bonds are perceived as sort of 'bao jiak,' there is very high demand for them, and hence their low yields.

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15-06-2019, 09:53 AM. (This post was last modified: 15-06-2019, 09:56 AM by Big Toe.)
Post: #5
RE: Astrea V Class A1 Bonds 3.85% p.a.
If we look at residential real estate prices, rental yields and real wage growth, it isn't worth the while to invest in residential real estate now.
This is despite the low interest rate environment. In the longer run prices will rise in tandem with wage growth and GDP, these 2 isnt great now and unlikely to be great in the foreseeable future. So the only way to make the money in residential real estate is to have prices come down to a depressed level.

Retail bonds is just sad now, there are not much that are traded publicly now. It is only right that one of the worlds biggest sovereign wealth fund offers the local market some variety. I think 3.85% is a fair deal even though we dont have an idea what they consists of and only know the rating. SIA is 3.03% and not rated. Chances are that both are going to do just fine. Banks are giving higher dividend yields but we cant be sure how sustainable it is going forward with interest rate hike pausing and possibly a small chance of reversing. But if the economy holds and sibor is able to increase without a dramatic drop in new loans and increase in delinquency, maybe the bank dividend yields can continue to be attractive. Your guess is as good as mine.

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15-06-2019, 10:00 AM.
Post: #6
RE: Astrea V Class A1 Bonds 3.85% p.a.
Hyflux I recall was never temasek link by shares rite?

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15-06-2019, 01:34 PM.
Post: #7
RE: Astrea V Class A1 Bonds 3.85% p.a.
It's packaged in a bond like manner but isn't this a structured product? Bonds as debt security but Astrea is investing in equity via PE investments right?
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16-06-2019, 07:42 AM.
Post: #8
RE: Astrea V Class A1 Bonds 3.85% p.a.
I guess it's a bond issued by a pe fund with a so called reputable name
It claimed to be the first of its kind in the world due to the innovation of the great brains in it probably to satisfy a nation call for yield

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17-06-2019, 03:09 PM.
Post: #9
RE: Astrea V Class A1 Bonds 3.85% p.a.
yes, retail market is starved for fixed income yield. Hence, the high pricing (low yield) for ASTREA V even when you compare it with the previous issuance ASTREA IV.

And yes, its a structured product. Hence a credit rating of Asf (meaning this is rated A but with a separate classification system sf = structured finance).

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17-06-2019, 03:32 PM.
Post: #10
RE: Astrea V Class A1 Bonds 3.85% p.a.
ASTREA IV is currently trading at between S$1.065 and S$1.070 today which yields 4.06% to 4.08%.

Shorter maturity period with a higher yield than that of ASTREA V.

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