Astrea IV Class A-1 bonds close first trading day at 103.7

Singapore

TEMASEK-LINKED Astrea IV's Class A-1 bonds closed at 103.7 on their first trading day, translating to a yield of 3.53 per cent.

On Monday, the Class A-1 bonds were rated Asf by Fitch and A(sf) by S&P, with "sf" denoting the rating for structured finance.

The Class A-2 bonds were rated Asf by Fitch, while the Class B bonds were rated BBBsf by Fitch. S&P did not rate the Class A-2 and Class B bonds.

The bonds opened at 102.1 on Monday.

The S$121 million retail offering of the bonds, issued by Temasek Holdings' subsidiary Azalea Group, was 7.4 times subscribed.

Clifford Lee, head of fixed income, DBS Bank, noted that Astrea IV marks a "significant milestone" in Singapore's fixed income space, as it is the first SGD retail bond to benefit from price discovery in an institutional book building process where institutional investors, established family offices and private banks provided price leadership and anchor interest beforehand.

"The final strong reception that Astrea IV found across broad investor classes attests to the acceptance of its merits by the market and paves the way for more bonds of its nature to come," he added.

iFast's bond specialist Ang Chung Yuh said: "It is unsurprising that the market has reacted so positively on the first day of trading for Astrea IV's bonds. There has been a lack of options in the retail bond market and Astrea IV has the support of multiple positive media reports partly due to its Temasek linkage."

But Mr Ang cautioned against over-reacting to the Temasek connection. "It is important to take note that these bonds are not backed by Temasek. Instead, the underlying investment portfolio has more direct bearing on the yield of the bonds."

Astrea IV PE (private equity) bonds are backed by cash flows from a portfolio of investments in 36 underlying PE funds. These funds have a net asset value of US$1.1 billion and are invested in 596 investee companies globally across multiple sectors.

Of the total gross proceeds of the US$501 million raised from the issue of the bonds, approximately US$486 million have been utilised towards repayment of a certain portion of the existing sponsor shareholder loan, in line with what was stated in the prospectus.

Following the above utilisation, the balance of the gross proceeds remaining is US$15 million, which will be utilised towards payment of fees and expenses incurred from the issue and offering of the bonds.

READ MORE: Editorial: Retail investors of Astrea IV bonds know a good deal when they see one