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Temasek-linked Astrea PE bonds get upgrade, affirmations by Fitch
FITCH Ratings has upgraded and affirmed its ratings assigned to a series of private-equity (PE) bonds offered by Astrea III and Astrea IV, both Temasek-linked PE vehicles.
Astrea III’s US$170 million Class A-2 notes are now rated “A+(sf)” from its previous “A(sf)” grade, while its US$100 million Class B notes are rated “BBB+(sf)”, from a previous “BBB(sf)” grade.
The "sf" suffix refers to a structured financial instrument.
Meanwhile, Astrea III’s S$228 million Class A-1 notes are affirmed at a rating of “A+(sf)”, which were previously upgraded to that rating in July 2017.
Astrea IV’s S$242 million Class A-1 notes have been upgraded as well to “A+(sf)”, from a previous rating of “A(sf)”, while its US$210 million Class A-2 and US$110 million Class B notes have been affirmed at “A(sf)” and “BBB(sf)” respectively.
Fitch’s upgrade reflects the performance and reserves accounts balances of both the Astrea III and Astrea IV transactions, the statement said. Fitch attributed this to the Astrea III and Astrea IV’s diversified PE portfolios, sufficient over-collateralisation, ability to pass all loan-to-value (LTV) tests to date and other key structural protections. It also noted the "close alignment of interests" between the sponsors and bondholders.
"According to Fitch, both Astrea III and Astrea IV have thus far performed in line with its expectations, and significantly better than the stress scenarios run in its initial rating analysis,” the statement added.
Azalea chief executive Margaret Lui said: “This upgrade bears testament to the quality and cash generative nature of both Astrea PE portfolios, which enables investors to receive regular income while enjoying diversification benefits.”
Astrea III, sponsored by Astrea Capital, is backed by cash flows from 33 funds across various vintages managed by 25 general partners. As at Dec 31, 2018, the funds were invested in 420 companies across different sectors and regions.
Launched in June 2016, Astrea III issued the first listed bonds in Singapore backed by cash flows from PE funds. The initial issuance, to institutional and accredited investors in 2016, comprised S$228 million of class A-1 notes with a yield of 3.9 per cent; US$170 million of class A-2 notes yielding 4.65 per cent; and US$100 million of class B notes yielding 6.5 per cent; and US$70 million of class C notes yielding 9.25 per cent.
Astrea IV was first launched in June 2018 as the first listed retail PE bond in Singapore. Sponsored by Astrea Capital IV, the bond is backed by cash flows from 36 funds across various vintages managed by 27 general partners. As at Dec 31, 2018, the funds were invested in 546 companies across different sectors and regions.
The issuers of Astrea III and Astrea IV are indirect wholly-owned subsidiaries of Azalea Asset Management, a wholly-owned unit of Temasek. (see amendment note)
Amendment note: A previous version of the story listed Astrea III and Astrea IV as both being sponsored by Astrea Capital, when Astrea IV is in fact sponsored by Astrea Capital IV. The article has been corrected to reflect this change.