UPDATE: Temasek-linked Astrea 7 pricing bonds: Client note

Pink azalea flowers. Photo by Tina Xinia on UnsplashPink azalea flowers. Photo by Tina Xinia on Unsplash

This item was originally published on Wednesday, 18 May 2022 at 14:41 SGT; it has since been updated with more details.

Temasek-linked Astrea 7 is pricing three classes of private-equity bonds, with public and institutional tranches, according to a client note seen by Shenton Wire Wednesday.

Astrea is sponsored by Astrea Capital, which is a wholly owned subsidiary of Azalea Asset Management, which in turn is wholly owned by Singapore state-owned investment company Temasek Holdings. The Astrea Platform is a series of investment products based on private equity funds’ portfolios.

According to the preliminary prospectus, the bonds will be backed by a portfolio valued at US$1.91 billion with investments in 38 private equity funds and 982 investee companies, with an average weighted vintage of 2017. The portfolio is 77 percent invested in buyout funds, which have the strongest historical performance among private equity strategies, the prospectus said, adding the top three fund managers in the portfolio are Warburg Pincus, KKR and Permira. The remainder of the portfolio is in growth funds, the prospectus said.

The loan-to-value of the offering is 39.6 percent, meaning the portfolio value is more than twice the size of the bond offering, the preliminary prospectus said.

A representative of Azalea told Shenton Wire the final prospectus would be released on the Monetary Authority of Singapore (MAS)’s OPERA website at a later date.

The proceeds of the bonds are earmarked to repay some of the existing equity investor(s) shareholder loan(s) incurred with the asset-owning company’s acquisition of the fund investments, the client note said.

The public offer period is from 20 May to 26 May, with a minimum of S$2,000 for the class A-1 bonds and US$2,000 for the class B bonds, the client note said. All of the bond classes will have a 1 percentage point per annum step up if not redeemed on the call date, the client note said.

Class A-1 bonds

The class A-1 bonds have an initial pricing guidance of the 4.375 percent area, with a landing guidance of the 4 percent area, the client note said.

The class A-1 bonds will have a scheduled call date of five years and a maturity date of 10 years, the client note said. The bonds will have a 1 percentage point per annum step up if not redeemed on the call date, the client note said.

This class will offer a total of S$526 million, including S$280 million at 100 percent of face value to the public in Singapore via ATM/internet banking and mobile banking, the client note said.

In addition, S$246 million of class A-1 bonds will be offered at 100 percent of face value to institutional and other investors in Singapore and places outside the U.S., the client note said.

The class A-1 bonds are expected to be rated A-positive by both Fitch Ratings and S&P Ratings, the client note said.

Class A-2 bonds

The class A-2 bonds have an initial pricing guidance of the 5.625 percent area, with a landing guidance of the 5 percent area, the client note said.  The class A-2 bonds will have a scheduled call date of five years and a maturity date of 10 years, the client note said.

The A-2 offering will have an aggregate principal amount of US$175 million, and will be in denomination of US$50,000, the client note said.

Fitch Ratings is expected to rate the class A-2 bonds at A, the client note said.

The class A-1 and A-2 bonds will have priority of payments, the client note said.

Class B bonds

The class B bonds have an initial pricing guidance of the 6.375 percent area, with a landing guidance of the 6 percent area, the client note said.

The total principal size of the class B bonds is US$200 million, including US$100 million to the public in Singapore and US$100 million to institutional and other investors in Singapore and outside the U.S., the client note said. For the class B bonds, the scheduled call date is six years, with a maturity date of 10 years, the client note said.

The class B bonds are expected to be rated BBB-plus by Fitch Ratings, the client note said.

The lead managers of the offering are Credit Suisse, DBS Bank and Standard Chartered Bank, the client note said.