There’s been a slew of news and updates regarding the Astrea bonds in the last week.
Q1 hedge fund letters, conference, scoops etc
Temasek-linked PE vehicle Astrea V to issue US$600m bonds
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.
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.
Comments:
The managers alluded to future issues during the investor day session last so it is great to finally see news of this come out. The preliminary prospectus has been lodged (link).
You have similar structural safeguards in place which are the key components of this issue and highlighted in the comments below regarding the upgrades by Fitch on the previous Astrea bonds.
I realise that Astrea bonds are pretty divisive. The issuers have tried their best to explain what is a pretty complex issue.
I really like the Astrea bonds because of the structural safeguards put in place. I also attended their Investor Day in January earlier this year and had a pretty good feeling about management.
You can check out my earlier thoughts here:
https://theasiareport.com/astrea-investor-day-2019-write-up-thoughts/
So anyway back to the Astrea V issue, there are two key differences that I note:
Capital structure has been simplified with there just being three tranches this time
Furthermore, it seems that the retail tranche will be upsized this time around which will be great considering how oversubscribed the Astrea IV retail issue was.
The vintage of the private equity funds is younger than the previous issues
Astrea V Fund Vintages
Astrea IV Fund Vintages
In other news, the older Astrea issues have also been in the news:
Temasek-linked Astrea PE bonds get upgrade, affirmations by Fitch
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.
Comments:
The highlighted section is the point which we covered in our two previous articles on Astrea IV last year and something that will be key to my interest in the Astrea V bonds.
Article by Jun Hao, The Asia Report
