Singapore's Azalea targets $754m PE-backed bond offering

In previous iterations of the Astrea series, retail investor access has been limited to the class A-1 bonds that sit uppermost in the capital structure, with institutional and accredited investors covering the class A-2 and class B tranches. As part of the seventh offering, retail investors can subscribe to the riskier class B bonds. These are denominated in US dollars rather than Singapore dollars.

Azalea has already completed a placement of SGD 246m in class A-1 bonds, USD 175m in class A-2 bonds, and USD 100m in class B bonds to institutional and accredited investors. There was USD 1.5bn in demand from 55 accounts. Institutions such as insurance companies, asset managers, endowments, and foundations account for 60% of the investor base.

The firm is now offering SGD 280m in class A-1 bonds and USD 100m in class B bonds to retail investors. The two tranches – comprising secured, fixed-rate bonds with coupons of 4.125% and 6%, respectively – will trade on the Singapore Exchange’s main board. This is the fourth time Azalea has included class A-1 bonds with retail participation.

“Both class A-1 Bonds and class B Bonds offer retail investors an opportunity to invest in investment-grade bonds that provide private equity exposure and regular income. Through our regular engagement with retail bond investors, we have seen significant interest to invest in the more junior classes of the Astrea PE bonds,” said Margaret Lui, CEO of Azalea, in a statement.

“We are pleased that Astrea 7 offers retail investors in Singapore the option to invest in a US dollar-denominated bond. This is very much in line with our commitment to broaden access to private equity and better cater to investors with different risk preferences and investment horizons.”

Astrea 6 was worth USD 643m: institutional and accredited investors picked up SGD 132m in class A-1 bonds, USD 228m in class A-2 bonds, and USD 130m in class-B bonds; retail investors were offered SGD 250m in class A-1 bonds. The bonds available to retail investors have a mandatory call option after five years and an interest rate step-up if there is no redemption. It is the same for Astrea 7.

The overall collateralised fund obligation (CFO) for Astrea 7 is underpinned by cash flows from 38 private equity funds with a net asset value (NAV) of USD 1.9bn, according to a prospectus. Azalea retains a majority stake in each fund interest, with the remainder packaged into the three tranches of bonds.

The funds are managed by 29 different GPs, including Advent International, Bain Capital, The Blackstone Group, The Carlyle Group, KKR, L Catterton, Providence Equity Partners, Silver Lake, Thoma Bravo, TPG Capital, and Vista Equity Partners. On a geographic basis, 55% of the portfolio is in the US, 27% in Europe, and 18% in Asia.

There are seven dedicated Asia funds: KKR Asian Fund III, PAG Asia III, and TPG Asia VII offer pan-regional coverage, while CPE China Fund III, Trustbridge Partners VI, Warburg Pincus China, and Yunfeng Fund III are specific to China. KKR Asian Fund III is the third-largest position overall, accounting for 3.4% of NAV.

“Similar to previous Astrea transactions, there are several structural safeguards in place for Astrea 7. The diversification and quality of the Astrea 7 portfolio, together with the structural safeguards, help to mitigate downside risks for the Astrea 7 bonds,” said En Yaw Chue, CIO of Azalea.

Azalea was established in 2015 and assumed responsibility for the Astrea series from Temasek with a mandate to broaden access. It has also launched fund-of-funds products aimed at institutional and accredited investors. A second fund-of-funds closed on USD 805m January while a debut sustainability fund-of-funds vehicle was launched in March.

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• Topics
• Southeast Asia
• Secondaries
• LPs
• Singapore
• Temasek Holdings
• Azalea Asset Management