Astrea V PE-backed retail bonds receive strong response

THE latest public offer of bonds backed by private equity (PE) has been met with a strong retail response.

At the close of the offer, Astrea V's Class A-1 for retail investors attracted nearly S$820 million from over 30,800 applicants. This is equivalent to a subscription rate of 4.5 times. 

Astrea V is the fifth in a series of PE-backed securities offered by the Azalea Group, a subsidiary of Temasek Holdings. In the latest issue, S$180 million worth of Class A-1 bonds was open for retail subscription, with a fixed coupon of 3.85 per cent. The bonds are backed by a US$1.3 billion portfolio of 38 PE funds.

For institutions and accredited investors, there were also a S$135 million placement tranche of A-1 bonds, US$230 million of A-2 bonds and US$140 million of Class B bonds. 

For all three classes of bonds, Astrea V received subscriptions of a total of US$4 billion. This represents a subscription rate of 6.7 times the US$600 million of bonds on offer.

Azalea chief executive Margaret Lui said the firm is pleased to have broadened its investor base. "We greatly appreciate and thank our retail applicants for the encouraging response and feedback. We seek investors' understanding if they did not receive the allocations they applied for, as demand far exceeded the amount offered."

She hinted that Azalea may eventually offer an equity-type tranche for retail. "Step by step, Azalea hopes to be able to offer opportunities for retail investors to invest in the higher risk but higher returns classes of Astrea bonds. We also hope to be able to make equity-type products based on PE available to retail investors in the future."

Seventy-five per cent of the Class A-1 bonds were allocated to applicants who applied for less than S$50,000, with each receiving some allocation. Those who applied for S$5,000 or less received full allocations. Balloting was conducted for applicants who applied for S$50,000 or more, with successful applications allocated in part.

The Astrea V Class A-1 bonds will be issued on June 20. Retail investors can check their allocations by logging into their CDP accounts on June 21. The bonds are expected to begin trading on SGX-ST on June 21.

Astrea V is the second PE-backed bond issuance offered to retail investors. The first was Astrea IV last year which was 7.4 times subscribed.

PE is typically accessible to institutions and private investors, because of high minimum investments and illiquidity. But Azalea has sought to expand access among retail investors by building in risk-mitigating features, including safeguards, in order to ensure coupons are paid.