Why i will be investing in the Astrea IV private equity Class A-1 bond Skip to main content

Why i will be investing in the Astrea IV private equity Class A-1 bond

Astrea IV is a wholly owned subsidiary of Azalea Asset Management Pte. Ltd, which is wholly owned by Temasek Holdings. They are issuing bonds for their private equity funds, so this is the first time the retail market has access to the private equity space. 

BOND DETAILS

Name: Class A-1 Bonds 10NC5

Interest: 4.35% pa, semi annual payment. If not redeemed after 5 yrs on Jun 2023, will step up to 5.35% pa

Maturity: 10 yrs, on 14th Jun 2028 with scheduled call date on 14th Jun 2023. "Scheduled" is not "optional". If there is sufficient cash set aside for the class A bond to be redeemed, it must be redeemed. It's not an option.






Application for IPO: Min $2k, with integral multiples of $1k thereafter

Period of application for IPO: 6th Jun 2018 9am to 12 Jun 2018 12 pm

Rating:  A by Fitch, and A by S&P

Extra features: There is a bonus redemption premium of an amount not exceeding 0.5% of the principal amount. This means that if the par value if $1.000, the bond might be redeemed at less than or equal to $1.005, if conditions are met. The condition is that the sponsor receives 50% of its total equity (US $313 million) on or before 14th Jun 2023.

More details from the full prospectus here. Product highlights can be found here.  Video explanation found here.

My rationale for investment:
1. Interest rate meets my target interest of 4%. Cash flow statement assuming the issuer redeems the bond after 5 years.

2. I'm comfortable that my money will be used to invest in the PE space, where returns are easily 50% and above. I'm guaranteed the bond coupons at 4.35%. These are my retirement funds, so i'm comfortable with this risk level.

3. Class A-1 bond.  First in line to collect back funds in the event of a default. 

4. Diversification from equity and REITs.  Capital isn't subjected to market fluctuations as I intend to hold this until maturity. I'll get 100% of my investment back.

5. Am unlikely to purchase this from the market after IPO, since the prices usually shoot above PAR value. 

Since this is the first retail bond launched, I figure there will be more of such launches.  In a rising interest rate environment, I'd expect the future launches to offer higher interest rates.  So i'll be balloting for a small amount of 5k each, for the 3 of us.  I bet this tranche will extremely oversubscribed, as people think these bonds are backed by Temasek Holdings, in which they are not. 

A $2 fee to try my luck.  

Comments

Popular posts from this blog

Hotel Review: Sheraton Grande Sukhumvit, a Luxury Collection Hotel, Bangkok

As I travel quite often for work, I’m going to keep a record of all the hotels I’ve stayed in, to serve as a reminder of what works and what doesn’t. It’ll make future bookings much easier. Location:  Right at the Asok BTS, across from Terminal 21 and the Westin.  I think traffic in this area is too jammed, and will likely avoid in the future. Room:   The bed is very comfortable, but the decor is quite old school.  The room feels like parts of it has been modernized, but parts of it are still the same as when the hotel was built.  The whole scheme doesn't gel. The bathroom is also dated and in need of upgrade.  Who uses small tiles like this in bathrooms nowadays?  This is so 1990s. Gym:  It has a couple ellipticals and a couple treadmills.  Not much selection of weight machines and the space is rather crammed.  The decor is seriously old school 1990s, but I think all Sheratons are like this. Breakfast:  The selectio...

Hotel Review: Fairmont Raffles Manila

As I travel quite often for work, I’m going to keep a record of all the hotels I’ve stayed in, to serve as a reminder of what works and what doesn’t.  It’ll make future bookings much easier. Location:  In downtown Makati opposite Greenbelt 4 Shopping Area and Glorietta mall.  Great for food and shopping options. Easy access to Museum cafe! Room:   Renovated in 2014. Decently sized rooms, although the carpets are beginning to smell and my room had a musky smell.  Bed is soft yet supportive of my back, so I sleep decently well here. Gym: The treadmills and ellipticals overlook the Greenbelt shopping area  There are so many weight machines here, upper and lower and core.  Free weights as well.  Huge open space to do yoga, circuits, etc.  The perfect gym. Breakfast:  The spread is wide, but I don't fancy what they offer.  It's either too sweet or too salty.  So I only eat their omelette and bread, with fresh juice....

Optimizing your CPF account

Your CPF account consists of 3 accounts: Ordinary Account (OA), Special Account (SA), and your Medisave Account (MA). The OA is primarily used for providing housing, while SA is used for retirement. MA is used to pay for healthcare. The interest rate on your OA is 2.5%, while the interest rates on SA and MA are 4%. There is an extra 1% interest upon reaching the first $60,000, combined across all three (with at least $20,000 in your OA). In order to optimize your CPF account, the key is to move the lower interest OA money into your SA, to take advantage of the compounding effect of that extra 1% per year. Once you begin working, transfer your OA account into your SA account only a monthly basis, as CPF interest is calculated monthly.   This is an irreversible process, but it forms 1 part of your retirement portfolio.  There's no need to inject extra cash into CPF. Once you hit the SA maximum of $171k (based on 2018 figures) the funds will automatically be channel...