Temasek-backed PE bonds attract record retail following

This is the fifth transaction in the Astrea series through which Azalea Asset Management has facilitated third-party participation in the Temasek private equity portfolio, and the second to feature listed retail bonds. The total size of the collateralized fund obligation (CFO) was $600 million, comprising S$315 million ($230 million) in class A-1 bonds, $230 million in class A-2 bonds, and $140 million in class B bonds.

Azalea first placed S$135 million in class A-1 bonds to accredited investors and then marketed the remaining S$180 million to retail investors. These bonds, which have a 10-year tenor and a fixed interest rate of 3.85% per annum, will begin trading on the Singapore Stock Exchange on June 21. In the previous Astrea transaction, completed last year, a total of $501 million was raised. The class A-1 tranche was S$242 million, of which half went to the retail market.

Of the 30,816 applicants – up from around 25,000 last year – 28,358 were successful. Three-quarters of the offering went to 25,900 people who applied for less than S$50,000. The 3,412 successful applicants who sought less than S$5,000 received full allocations. Balloting was conducted for those who wanted to subscribe to S$50,000 or more of the bonds.

“Step by step, Azalea hopes to be able to offer opportunities for retail investors to invest in the higher risk but higher returns classes of Astrea bonds. We also hope to be able to make equity-type products based on PE available to retail investors in the future,” said Margaret Lui, CEO of Azalea.

The Astrea V portfolio – in which Temasek retains a majority stake – comprises positions in 38 funds, managed by 32 different GPs, with a value of $1.32 billion as of March. The funds have a weighted average age of 5.4 years and $215 million in aggregate undrawn commitments. The vintages range from 2011 to 2016. Based on the location of the investee companies, the portfolio is 49.3% North America, 22.8% Europe and 24.6% Asia.

The largest positions are with global or North American funds managed by the likes of KKR, Silver Lake, TPG Capital, The Blackstone Group, Bain Capital, General Atlantic, and Warburg Pincus. Asian exposure includes regional vehicles raised by KKR, CVC Capital Partners, TPG, and PAG Asia Capital, as well as country managers such as Hahn & Company in Korea and Hopu Investment, FountainVest Partners, and Yunfeng Capital in China.

Retail participation was always an objective for the Astrea series, but it took a while to get there. Astrea I in 2006 saw $809 million raised to buy 46 fund positions. Class A and B rated notes accounted for $489 million of the corpus and the rest was “quasi-equity,” of which $171 million could be called to cover unfunded commitments. Temasek contributed 49.5% of the quasi-equity, with third-party investors putting in 50.5%.

When Astrea II launched in 2014, it was structured more like a traditional secondary. Ardian took the lead in pricing a portfolio of 36 fund interests worth more than $1 billion, including unfunded commitments. Temasek held a 38% stake, while much of the rest is said to have been covered by an Ardian fund. Four other institutional investors came in as well. 

For Astrea III in 2016, the portfolio was worth around $1.1 billion and Temasek retained a majority stake, putting the bond issuance at approximately $510 million. Institutional investors were the largest buyers, with some qualified individual investors also participating.

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