A unit of Singapore state investment firm Temasek Holdings is seeking to raise a total of $598 million through private equity bonds targeted at retail investors.
According to a preliminary prospectus lodged with the Monetary Authority of Singapore’s Opera site on Wednesday, Temasek’s indirect wholly-owned subsidiary, Azalea Asset Management, will offer three classes of bonds – Class A-1, Class A-2 and Class B Bonds.
Of the three classes, a portion of the Class A-1 Bonds will be offered to retail investors in Singapore for a minimum investment of S$2,000, giving retail investors exposure to private equity.
Class A-1 bonds expects to raise S$315 million ($228.6 million) and are scheduled to be redeemed at the end of five years. The Class A-2 and Class B Bonds expect to raise $230 million and $140 million respectively, and will be offered to institutional and accredited investors only.
For Class 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 of not exceeding 0.5 per cent of principal at redemption by the end of the fifth year will be made to Class A-1 bondholders if performance condition is met.
“The offering of the Astrea V PE Bonds represents a continuing step by Azalea to bring retail investors in Singapore closer to private equity through listed retail PE bonds,” said Azalea.
The Astrea V PE bonds are backed by cash flows from a portfolio of 38 fund investments managed by 32 GPs, with total net asset value of $1.32 billion, as of March 31. The fund investments are diversified across vintages with a focus on buyout and growth equity strategies.
As of December 31, 2018, the fund investments were invested across 862 companies, covering IT, consumer discretionary, financials, industrials, healthcare and communication services. No single investee company is larger than 1.9 per cent of net asset value (NAV).
Azalea invests in PE funds, with a focus on the development and innovation of new investment platforms and products to make PE accessible to a broader group of investors through its Astrea platform.
Launched last year, Astrea IV was the first listed retail bonds in Singapore backed by cash flows from PE funds. Half of the most senior class of bonds amounting to S$121 million ($90 million) were offered to retail investors in Singapore after a price discovery process with institutional investors, and the remaining bonds were subscribed by institutions and accredited investors.
Established in 2006, the Astrea Platform is a series of investment products based on diversified portfolios of PE funds, with four in the series to date, with Astrea V being the latest addition to the platform.
Prior to 2016, certain Temasek entities launched Astrea I and Astrea II respectively, each of them involving investment products based on portfolios of PE Funds. In 2016, an Azalea Group entity launched the Astrea III transaction, introducing the first listed notes in Singapore backed by cash flows from PE Funds.