New Astrea V

[numbers]

What is the risk level of Astrea V?
How would it perform in a recession & financial crisis like 2008?

if temasek default on these bonds....i think u will sure see the opposition come into govt liao at next election

 

[tangent314]

if temasek default on these bonds....i think u will sure see the opposition come into govt liao at next election

Unlikely. If Astrea bonds default, we will most likely see the same reaction we are seeing from the Hyflux defaults. People that own the bonds will be saying that they are entitled a bail out. Everyone else have little sympathy and thinks these people don't deserve a bail out.

 

[madtari]

Temasek has totally ZERO obligation towards this bond... Please don't go in thinking it will be 'guaranteed' by Temasek/Ho Ching.

if temasek default on these bonds....i think u will sure see the opposition come into govt liao at next election

 

[Geeezz]

the company selling this ish a different entity frm Temasek. if the company liquidate it will nt affect Temasek n Temasek will nt hv any obligation to bail out investors.

the reason why they use Temasek name ish because it’s easier to sell. if they just put their company name ppl will be like wtf ish that company n many will do a more thorough due diligence.

u can say that me huan spread fear me dunnoe what i m talking abt, me just huan ppl to do own due diligence before buying n nt see name n yield nia

 

[assiak71]

Conpared to sia bond, which riskier?

 

[limster]

Conpared to sia bond, which riskier?

one is unrated, one is likely to have an A+ 'investment grade' rating. The question to ask is whether there is an excess yield on the Astrea over bonds with a similar credit rating.

For Astrea IV, the yield offered was quite a bit higher than the yield on investment grade bonds with similar ratings, implying that the price will rise after IPO due to 'yield arbitrage'. Turned out to be correct.

So have to see the yield for this tranche before deciding....

Of course some no need to see the yield, automatically say its bad already. Hopefully higher allocation for those that apply then....

Structured finance: 'sf' identifier
111. The 'sf' identifier shall be assigned to ratings on "structured finance instruments" when required to comply with an applicable law or regulatory requirement or when S&P Global Ratings believes it appropriate. The addition of the 'sf' identifier to a rating does not change that rating's definition or our opinion about the issue's creditworthiness. For detailed information on the instruments assigned the 'sf' identifier, please see the appendix for the types of instruments that carry the 'sf' identifier.

 

[FrostWurm]

Conpared to sia bond, which riskier?

Honestly hard to say; they are in different industries, different geographies and with different business models.

But this will likely have an yield higher than the SIA bond So if you want to use that as a proxy for risk, you can...but I don't think it will be a good proxy.

 

[kehyi4]

https://www.businesstimes.com.sg/companies-markets/temasek-linked-pe-vehicle-to-issue-us600m-bonds

Temasek-linked PE vehicle to issue US$600m bonds
THU, MAY 23, 2019 - 5:50 AM

YIELD-HUNGRY retail investors can look forward to a new bond issue by Temasek Holdings-linked private equity vehicle Astrea V. The public offer tranche is expected to be larger than the S$121 million from Astrea IV last year, The Business Times understands.

In its preliminary prospectus lodged on the Monetary Authority of Singapore's Opera site on Wednesday, the private equity (PE) bond issued by Astrea V is largely similar to Astrea IV's 2018 bond issue in terms of structure and features.

Details such as the coupon rates of the Astrea V bond are expected soon. The 4.35 per cent to 6.75 per cent coupon rates of Astrea IV's 2018 bond issue could be instructive for Astrea V's though.

Ang Chung Yuh, manager of fixed income division at iFast and has been invited to a roadshow to find out more about the latest issue, told BT that the coupon rates depend on a lot of factors, including how diversified the portfolio is and the proportion of equity.

Still, he expects investors' response to be strong given the good track record of two earlier Astrea PE bonds, performance of which has been in line with expectations of ratings agency Fitch. These bonds have seen their ratings recently upgraded.

Also, retail investors who were unfamiliar with asset-backed securities have had the benefit of the past year to look at the performance of Astrea IV, Mr Ang said.

Astrea V issue plans to raise a total of US$600 million via three tranches, each designed to target a particular risk appetite.

The least-risky tranche is the Class A-1 offering amounting to S$315 million and scheduled to be redeemed at the end of five years. A portion of the bonds will be offered to retail investors at a minimum investment of S$2,000. The exact amount available for retail subscription will be determined and will depend on the response during bookbuilding - a process in which financial advisers ask important investors how much they might buy and at what yield in order to decide the coupon rate.

BT, however, understands that this is expected to be larger than Astrea IV's S$121 million.

Class A-1 tranche is expected to be rated Asf and A+ (sf) by Fitch and its peer S&P respectively, with the "sf" suffix referring to structured financial instrument.

Class A-2 bonds - also scheduled to be redeemed at end of the fifth year - and Class B bonds are expected to raise US$230 million and US$140 million, respectively. Both classes will be available to accredited investors and institutions only.

Expected ratings for A-2 and B tranches are Asf and BBBsf, respectively by Fitch, but these two tranches are not expected to be rated by S&P.

For A-1 and A-2 bonds, there will be a one-time step-up interest rate of 1 per cent per annum if that tranche is not redeemed after five years.

Bonus payment, not exceeding 0.5 per cent of principal at redemption, will be made to A-1 bondholders if performance condition is met.

Similar to Astrea IV bond, this issue has structural safeguards in place including a reserve account that builds up cash to redeem the tranches.

Astrea V bonds are backed by a US$1.3 billion portfolio of 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.

Astrea V is sponsored by Astrea Capital V, an indirect wholly-owned subsidiary of Azalea Asset Management, which is wholly owned by Temasek.

 

[w1rbelw1nd]

BBCW is right. I question the intention of our SWF structuring and issuing such insturments to the retail market. There is no tax efficiency involved, and all the fx hedging and capital call facilities has cost involved. If it's such a great deal for retail investors, wouldn't astrea lose out on returns/ take up increased risk?

There is no winners from such structuring. Unless you are talking sgx or dbs heh.

 

[Toni90]

The State of Alaska does, more or less. Every state resident effectively gets one share in the Alaska Permanent Fund, and each year the Fund pays a dividend. The dividend varies according to the fund's performance, which is intimately tied to the performance of oil and gas in Alaska since that's the fund's charter/character.

Some university endowment funds offer something similar, called "charitable remainder trusts," and (I think) a few of those universities are government owned. Basically you make a decent or larger donation to the university endowment fund, usually of appreciated assets (for tax reasons). The endowment fund manages the donation with the same fund advisors and managers. The donor receives a regular dividend (similar to what the university itself receives from the endowment for its operating budget and capital investments), and when the donor dies the endowment plan keeps the remainder, for the benefit of the university. (Sometimes the trust is set up to include a survivor, such as a spouse, who continues receiving dividends as long as he/she is alive.) This arrangement is partly charitable, partly for tax optimization, partly for income, and partly for longevity insurance -- it's typically for all four motivations, combined.

Your usual misleading again? Talking about investment then u come up with examples of government benefit and donations. Obvious no one ever offer this kind of "preferred participation shares". But u can not accept that your idea is bullsh*t so have to come up with more bullsh*t.

 

[SKenny]

"Buy High, sell Low" is an expensive affair.

Hard truth.

 

[FrostWurm]

I don't see any problem with that. SG has a free market & such retail bonds open up more option for retail investors, & furthermore has credit rating (vs those without).

My own guess is that they did this under the government's intention to grow the retail bond market.

The issue size is not excessively large so there is likely enough institutional/HNW money lying around that wants to participate. The yield is also rather generous given the good credit rating.

Even unrated SIA bonds can be fully subscribed in spite of their low yields .

More choices are always better, with the caveat that availability to different classes of investors should be limited by credit ratings, wealth, income, concentration, and other factors.

As sad as it sounds, there are simply some folks who put all their eggs into one basket (despite having been told not to do it since primary school).

 

[BBCWatcher]

Obvious no one ever offer this kind of "preferred participation shares".

You seem to have a problem with civil, polite discourse.

I never claimed that any sovereign wealth fund offers preferred participation shares as I envision them. Singapore's should be the first. There are analogs and parallels, and I listed two of them (and described them as such).

My own guess is that they did this under the government's intention to grow the retail bond market.

No, that's not it. These aren't bonds; they're structured finance notes. Temasek is perfectly capable of issuing simple, direct obligation retail bonds, and it did in 2018. If the government wants more retail bonds (for some reason) then that's easy: every agency (LTA, HDB, PUB, etc.), GIC, and Temasek could be floating ordinary, simple, rated retail bonds every quarter. Plus MAS could issue some real return bonds at least once a year. The SGS auction calendar is empty for November and December.

 

[hwckhs]

No, that's not it. These aren't bonds; they're structured finance notes.

What are the implications of it being a structured finance notes instead of a bond?

 

[Geeezz]

What are the implications of it being a structured finance notes instead of a bond?

well, fr bonds the repayment will depend on the issuing company itself while fr structured deposits it depends on the underlying asset.

default of bonds payment will affect the company directly while default of structured products may not affect the company at all.

 

[FrostWurm]

No, that's not it. These aren't bonds; they're structured finance notes. Temasek is perfectly capable of issuing simple, direct obligation retail bonds, and it did in 2018. If the government wants more retail bonds (for some reason) then that's easy: every agency (LTA, HDB, PUB, etc.), GIC, and Temasek could be floating ordinary, simple, rated retail bonds every quarter. Plus MAS could issue some real return bonds at least once a year. The SGS auction calendar is empty for November and December.

Sure, I wouldn't mind terming them fixed-income if it serves to cover a broader category of such instruments. The thing is, all the entities you quoted are all quasi-government entities that operate as functions of the state. They have very low default probabilities and are not subject to the vagaries of the economy. This is definitely not the case for corporate bonds, where booms and busts are inherent in their operations.

In my opinion, their intention is to expand both the depth and breadth of the capital markets to retail investors, and this is a starting point. Highly-rated (encouraging others to get credit ratings), structured finance (introducing different types of financing structures to the market), and evenly-distributed to retail investors (everyone can get a small part and learn).

Of course, you are free to disagree, and I believe you will, but pray tell what other reasons would Astrea need financing from average joes like me for? Are they unable to get money from outside when there is so much cash around the world waiting to be deployed?

 

[Geeezz]

Sure, I wouldn't mind terming them fixed-income if it serves to cover a broader category of such instruments. The thing is, all the entities you quoted are all quasi-government entities that operate as functions of the state. They have very low default probabilities and are not subject to the vagaries of the economy. This is definitely not the case for corporate bonds, where booms and busts are inherent in their operations.

In my opinion, their intention is to expand both the depth and breadth of the capital markets to retail investors, and this is a starting point. Highly-rated (encouraging others to get credit ratings), structured finance (introducing different types of financing structures to the market), and evenly-distributed to retail investors (everyone can get a small part and learn).

Of course, you are free to disagree, and I believe you will, but pray tell what other reasons would Astrea need financing from average joes like me for? Are they unable to get money from outside when there is so much cash around the world waiting to be deployed?

well, for one, I wont call it financing, instead I would say that they are selling a product.

financing means that they are raising money to buy asset. but in this case, the asset (which is the pe portfolio) is alrdy bought and they wanted to free their "locked up" capital hence selling it to us.

so basically in this way, the risk is transferred to retailers and they still will get some cut of the money coming in at no risk. (of course some measurements are alrdy put in place)

with the free up capital they can then invest them into another pe portfolio etc. to gain higher returns.

so why they sell to us instead of the "private mkt" as I put it. maybe because the "private mkt" knew the risk-reward isn't worth it and hence expect a higher cut frm them.

one thing fr sure is that I do welcome such products as it is really interesting and in a way able to allow normal retailers to get into pe funds.

secondly, it can also help spice up the retail bond mkt in sg which is really...meh.

I am not saying that this product will fail but I just would like ppl to know the real risk they are actually taking because after speaking to many ppl abt this, most fail to understand the actual risk they are taking and instead are banging on the reputation of TH

 

[limster]

I am not saying that this product will fail but I just would like ppl to know the real risk they are actually taking because after speaking to many ppl abt this, most fail to understand the actual risk they are taking and instead are banging on the reputation of TH

Are you saying that Fitch and S&P's likely rating of Asf/ A+(sf) is wrong?

Or are you taking a risk that is no different from investing in any other A / A+ security?

 

[bluegt]

Sure, I wouldn't mind terming them fixed-income if it serves to cover a broader category of such instruments. The thing is, all the entities you quoted are all quasi-government entities that operate as functions of the state. They have very low default probabilities and are not subject to the vagaries of the economy. This is definitely not the case for corporate bonds, where booms and busts are inherent in their operations.

In my opinion, their intention is to expand both the depth and breadth of the capital markets to retail investors, and this is a starting point. Highly-rated (encouraging others to get credit ratings), structured finance (introducing different types of financing structures to the market), and evenly-distributed to retail investors (everyone can get a small part and learn).

Of course, you are free to disagree, and I believe you will, but pray tell what other reasons would Astrea need financing from average joes like me for? Are they unable to get money from outside when there is so much cash around the world waiting to be deployed?

Great assessment, your opinion is very well informed.

 

[assiak71]

When is astrea v details out?