Temasek unit makes public offer for $132m retail private equity bonds

A woman passes a logo of state investor Temasek Holdings at their office in Singapore July 8, 2014. REUTERS/Edgar Su

Azalea Investment Management, a unit of Singapore state investor Temasek,  has made a public offer for $132 million (S$180 million) Class A-1 private equity (PE) bonds – part of Astrea V PE Bonds – at a fixed interest rate of 3.85 per cent each year.

The public offer for Class A-1 bonds, the second listed PE bonds available to retail investors in Singapore, was announced after a placement to institutional investors which witnessed a strong demand.

In an announcement late evening on Tuesday, Azalea said, it had completed a successful placement of ($98.9 million) S$135 million of the Class A-1 Bonds, $230 million Class A-2 Bonds and $140 million Class B Bonds to institutional investors. The placement tranche, it added, was oversubscribed 7.3 times with an order book that ran over $3.4 billion received across all classes of bonds.

Azalea is aiming to raise close to $598 million through the Astrea V PE bonds.

“The book building process with institutional and accredited investors determined the interest rate, which is the same rate being offered to retail investors in respect of the Class A-1 Bonds,” said Azalea CEO Margaret Lui.

The Astrea V PE Bonds are backed by cash flows from a $1.3-billion portfolio of investments in 38 PE funds. Astrea V’s diversified portfolio provides exposure to 862 companies across a broad range of industry sectors covering IT, consumer discretionary, financials, industrials, healthcare and communication services. It has a similar structure and safeguards as the Astrea IV PE bonds that came to market last year.

The public offer will open from 9 AM on Wednesday and will close at 12 noon on June 18. The Astrea V PE Bonds are expected to be issued on June 20. Further, the Class A-1 Bonds are expected to list and start trading on the Mainboard of the SGX-ST on June 21 in board lot sizes of S$1,000.

Last year’s issuance of the Astrea IV PE bonds marked the first time retail investors in Singapore could invest in PE bonds. Astrea V Class A-1 PE Bonds are another series of investment-grade rated bonds, an effort to make PE more accessible to retail investors.

“Looking ahead, we will be expanding our product offerings in private equity for a wider investor base,” said Lui.

The Astrea V PE Bonds comprise three different classes of PE bonds: Class A-1, A-2 and B, with interest rates of 3.85 per cent, 4.5 per cent and 5.75 per cent per annum respectively. Each class caters to investors with different risk preferences and investment horizons. The Class A-1 Bonds are the most senior class of bonds, with a minimum subscription amount of S$2,000.

The Class A-1 Bonds have a final maturity of 10 years and a mandatory call at the end of five years (10MC5). The issuer (Astrea V Pte) will be required to redeem the Class A-1 Bonds on June 20, 2024 if there is sufficient cash set aside to repay Class A-1 Bonds and other conditions are satisfied. Otherwise, the interest rate on the Class A-1 Bonds will have a one-time step-up from 3.85 per cent to 4.85 per cent per annum until the Class A-1 Bonds are fully redeemed.

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.