New retail private equity bond by Temasek unit offers 3.85% yearly interest

The Temasek Holdings logo at the office at The Atrium@Orchard.
The Temasek Holdings logo at the office at The Atrium@Orchard.PHOTO: ST FILE

SINGAPORE - A subsidiary of Temasek Holdings is offering retail investors a private equity bond that carries an annual interest rate of 3.85 per cent.

Called Astrea V, the private equity bonds by The Azalea Group include Class A-1 bonds for retail investors totalling $180 million.

It is scheduled to be redeemed at the end of five years, The Azalea Group said on Tuesday (June 11).

The rest of the $315 million A-1 bonds is a placement tranche that was marketed to institutions and accredited investors.

Retail investors can subscribe to the bonds from Wednesday (June 12) to next Tuesday (June 18). They may do so through ATMs, with a minimum of $2,000.

Its launch comes on the back of the well-received Astrea IV issue made around the same time last year. The Astrea V bond will be largely similar to the Astrea IV issue in terms of structure and features.

Astrea IV's $121 million retail offering was 7.4 times subscribed, with all 25,660 valid applicants receiving some allocation. It was believed to be the world's first private equity bond with a tranche aimed at retail investors.

Private equity is an asset class typically accessible only by institutions or ultra wealthy private clients, owing to the high minimum investment required and a long lock-up period of up to 10 years.

Azalea's chief executive officer Margaret Lui said the company was very encouraged by the response to the Astrea IV issue, and added that there will be a "continued effort to make private equity more accessible to retail investors".

She said: "Looking ahead, we will be expanding our product offerings in private equity for a wider investor base."

Astrea V plans to raise US$600 million (S$827 million) via three tranches, with each targeting a particular risk appetite.

Class A-2 bonds are expected to raise US$230 million while Class B bonds aim to raise US$140 million. Both classes will only be for accredited investors and institutions.

Astrea V is backed by a portfolio of 38 private equity funds invested in 862 companies in industries such as IT, energy, healthcare and finance.

The funds have a weighted average fund age of 5.4 years and are valued at about US$1.32 billion.

Mr Wong Hong Wei, a credit research analyst at OCBC Bank, said Astrea V gives retail investors more options in a limited pool of retail bonds in the local market.

Astrea V is expected to be rated A+ (sf) by S&P. Calling it a "very strong" credit rating, Mr Wong added: "This is on a par with Singtel bonds in terms of credit rating, and it affords investors a safer option for diversifying their investment."