Temasek unit targets $500m PE fund-backed bond issue

This will be the fourth time that Temasek – via Azalea Asset Management, a wholly-owned subsidiary that has an independent board and management – has opened up its portfolio to outside investors. The scope has widened with each iteration of the Astrea Capital series and the ultimate objective was always to include retail participation.

Temasek’s positions in the 36 funds have a combined value of $1.1 billion. It will retain a majority equity stake in the portfolio, with a 45.5% interest packaged into three tranches of bonds. The plan is to sell S$242 million ($180 million) in class A-1 bonds, $210 million in class A-2 bonds, and $110 million in class B bonds, according to a prospectus. The tenor is five years and investors will receive fixed interest payments, backed by distributions from the funds, on a semi-annual basis.

The class A-1 bonds will be the first listed retail private equity bonds to trade on the Singapore Exchange’s main board. It is also the only tranche that comes with a 1% interest rate step-up if redemption doesn’t happen within five years and a 0.5% bonus payment on redemption if performance conditions are met. Retail investors – subscribing via ATM, if they choose – can invest as little as S$2,000 in this tranche of bonds.

Of the portfolio’s net asset value (NAV), 62.8% is in the US, 19.1% in Europe and 18.1% in Asia, with a strong bias towards buyout funds. Blackstone Capital Partners VI, PAG Asia I, and Silver Lake Partners IV are the three largest investments, together accounting for 22.6% of NAV. There are five Asia-focused funds among the 36: KKR Asian Fund II, Hahn & Company I, FountainVest China Growth Fund, Trustbridge Partners II, and PAG Asia I.

Temasek first securitized and sold off part of its private equity portfolio with Astrea I in 2006. Astrea II in 2014 saw Ardian serve as GP in a vehicle that assumed ownership of positions in 36 funds. There were six investors, including Ardian. Temasek went a step further with Astrea III in 2016, selling $510 million in bonds backed by 34 funds. Institutional investors were the largest buyers, with some qualified individual investors also participating.

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• Topics
• Southeast Asia
• Secondaries
• Exits
• Buyout
• LPs
• Singapore
• Temasek Holdings
• Secondaries