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Temasek-linked PE vehicle Astrea V to issue US$600m bonds

YIELD-HUNGRY retail investors could look forward to a new bond issue by Temasek-linked private equity (PE) vehicle Astrea V. The public offer tranche is expected to be larger than the S$121 million from Astrea IV last year, The Business Times (BT) understands.

In its preliminary prospectus lodged with the Monetary Authority of Singapore's Opera site on Wednesday, the PE bond issued by Astrea V is largely similar to Astrea IV's 2018 bond issue in terms of structure and features.

Details such as the coupon rates of the bond are expected soon. But the 4.35 per cent to 6.75 per cent coupon rates of Astrea IV's 2018 bond issue could be instructive for Astrea V's.

The latest issue plans to raise a total of US$600 million via three tranches, each designed to target a particular risk appetite.

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The least risky tranche is the Class A-1 offering amounting to S$315 million and scheduled to be redeemed at the end of five years. A portion of the bonds will be offered to retail investors for subscription with a minimum investment of S$2,000. The exact amount available for retail subscription has not been determined, and will depend on the response during the book-building process. BT, however, understands that this is expected to be larger than Astrea IV's S$121 million.

Class A-1 tranche is expected to be rated Asf and A+ (sf) by Fitch and S&P respectively, with the "sf" suffix referring to structured financial instrument.

Class A-2 bonds are expected to raise US$230 million - also scheduled to be redeemed at the end of the fifth year, while Class B, US$140 million. Both classes would be available to accredited investors and institutions only.

Expected ratings for A-2 and B tranches are Asf and BBBsf respectively by Fitch, but these two tranches are not expected to be rated by S&P.

For A-1 and A-2 bonds, there will be a one-time step-up interest rate of 1 per cent per annum if that tranche is not redeemed after five years.

Bonus payment of not exceeding 0.5 per cent of principal at redemption by the end of the fifth year will be made to A-1 bondholders if performance condition is met.

Similar to Astrea IV bond, this issue has structural safeguards in place, including a reserve account that builds up cash to redeem the tranches.

The underlying portfolio is valued at US$1.3 billion and is invested in 38 funds managed by 32 PE managers, giving exposure to some 860 companies in various industries including IT, consumer discretionary, financials, industrials, healthcare and communication services.