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Azalea Group, an indirect wholly-owned subsidiary of Temasek, has launched Astrea 8 Private Equity Bonds. These are the latest in a series of private equity bonds launched by Azalea since 2016. The Public Offer for Astrea 8 is for S$260 million in Class A-1 bonds and US$50 million in Class A-2 bonds. Investors have from 11 July, 9 am to 17 July 2024, 12 noon to apply for the bonds. Demand may be high as well. The Placement bonds set aside for institutional investors and accredited investors, worth another S$260 million and US$150 million, have already attracted strong interest with a subscription rate of over 2.6x. Moreover, the dearth of high-quality, rated retail bonds on SGX may attract more investors. Such investors may also be flushed with cash after the recent full redemption of a previous Astrea V Class A-1 bonds tranche. Astrea III and Astrea IV were fully redeemed in January 2022 and December 2023 respectively. Before you invest, here are 8 things you should know about the latest Astrea 8 PE bonds on offer for retail investors in Singapore. As its name suggests, Astrea 8 is the eighth launched in the series. Astrea I and Astrea II were launched by Temasek in 2006 and 2014 respectively – and only offered to institutional investors. With its success, Azalea Group – an indirectly wholly-owned subsidiary of Temasek, was formed to develop the private equity market in Singapore. Astrea III was launched as the first private equity bonds to be listed on SGX in 2016, while Astrea IV became the first SGX-listed PE bond for retail investors in 2018. Astrea 8 is Azalea’s sixth PE Bonds issuance and the second time both SGD and USD classes were offered to retail investors. Following the full redemption of Astrea V Class A-1 PE Bonds in June 2024, there remains just the Astrea VI Class A-1 PE Bonds (with a scheduled call date on 18 March 2026), Astrea 7 Class A-1 and Class B PE Bonds (with scheduled call dates on 27 May 2027 and 27 May 2028 respectively) on . Astrea 8 PE Bonds have been simplified – offering just two classes of bonds. Its Class A-1 bonds are denominated in SGX, while its Class A-2 bonds are denominated in USD. Both tranches are offered to retail investors, and there is no additional tranche meant just for institutional investors and accredited investors. Both Astrea 8 PE Bonds Class A-1 and Class A-2 rank equally – which means they enjoy the same priority for repayment in any adverse scenario, as well as structural safeguards. As you can see in the screen grab above, the total allocation for Class A-1 bonds are S$520 million or US$ 385 million. Half of this is set aside for the public offer (i.e. for retail investors to subscribe, while the other half is set aside for placement to institutional and accredited investors). From the Class A-2 tranche, US$50 million is set aside for the public offer, while US$150 million is set aside for the placement to institutional and accredited investors. Class A-1 bonds are denominated in Singapore Dollars and will earn investors 4.35% p.a. Class A-2 bonds, on the other hand, are denominated in US Dollars and will earn 6.35% p.a. Both Class A-1 and Class A-2 bond tranches have a set scheduled call date that is 5 years and 6 years away respectively. This means Astrea 8 must redeem the bonds by 19 Jul 2029 and 19 Jul 2030 respectively. If the bonds are not redeemed on their scheduled call dates, the interest rates payable will step up to 5.35% and 7.35% respectively. Furthermore, there will be no early redemption of Astrea 8 Class A-1 or Class A-2 PE Bonds before the scheduled call date, even if there are sufficient reserves. Interest payments for both Class A-1 and Class A-2 bonds are made semi-annually – on 19 January and 19 July each year. Interest payments for Class A-1 bonds will be made in Singapore Dollars. Similarly, for the USD-denominated Class A-2 bonds, interest payments will be made in US Dollars. Those who have applied for CDP’s Direct Crediting Service will receive both interest payments and principal repayment in equivalent Singapore Dollars through CDP’s Currency Conversion Service. While Astrea 8 is not backed by Temasek or the Singapore government, your money is relatively safe with the portfolio that the Azalea Group has constructed. Your money is backed by 1,028 investee companies within a portfolio that comprises 38 PE Funds. None of these companies make up larger than 1.3% of the entire portfolio, and it is diversified across various sectors and regions in the US, Europe and Asia. Combined, this portfolio is valued at US$1.5 billion. Over the years, previous launches of Astrea private equity bonds have also enjoyed multiple upgrades in credit ratings – reflecting the quality, performance, healthy loan-to-value ratios and the regular accumulation of cash reserves. All these factors contribute to de-risking each Astrea private equity bond issuance. . Similar to previous launches, the Astrea 8 incorporates strong structural safeguards for bondholders. On its prospectus, you can see the priority of payments. Note that there is more detailed information in the prospectus if you wish to learn more about the priority of payments. In general, cash flow from the 38 PE Funds will flow to Astrea 8. Payments to upkeep the fund’s operation will take priority (under clauses 1 to 4). Clause 5 is the interest payment for bondholders. Clauses 6 to 8 represent the structural safeguards that bondholders enjoy. First, Reserves Accounts build up cash to repay principal amounts of both Class A-1 Bonds and A-2 Bonds on their scheduled call date. The entire portfolio’s Loan-to-Value (LTV) is also kept at 40%. Crossing this debt limit will require the lowering of the Total Net Debt of the portfolio. Given the track record of previous Astrea PE Bonds, they have typically risen in value rather than suffered a lowering of value. Finally, a credit facility can be called upon to fund cash flow shortfalls for interest payments. Despite the lumpy nature of cash flows from private equity, Azalea Group said that they have never had to trigger this safeguard in past Astrea PE Bonds. What the priority of payment also means is that money will not flow to equity investors under Clause 11 unless the interest is paid out and funding the reserves for principal payment are kept up. Application is open from 11 July, 9 am to 17 July, 12 noon. You can apply via ATM, mobile banking or internet banking with any of the three local banks – DBS, OCBC and UOB. The Ballot Date is on 18 July, and those who are unsuccessful or only partially successful will start receiving their refunds. Those who are successful and partially successful will see trading commence on 22 July, 9 am. You need to subscribe in multiples of S$1,00 with a minimum of S$2,000 for Class A-1 bonds; and in multiples of US$1,000 with a minimum of US$2,000 for Class A-2 bonds. One of the key mandates for Azalea Group is to engage with local investors and build up both the diversity of bond products on the local exchange and the understanding of investors. For those who want to learn more about the Astrea 8 PE Bonds, you can visit its . You can browse key information on the site, watch the , download its prospectus, as well as register for the on 15 July (Monday) at 7pm at the SGX Auditorium. It's free! 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