We have already written an introduction to the various Astrea 9 Classes and the underlying PE portfolio. This time round, we will focus on the key credit features of Astrea 9 notes and share our opinion on the pricing of Astrea 9 notes.
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Here’s what you need to know about Astrea 9 private equity bonds
(Update: We have updated the pricing and opinion after the yield for the public offering was announced. For reference, Class A-1, A-2, and B PIK notes had an IPG of 3.70%, 6.00%, and 7.75%, respectively. Yields for highlighted comparable notes are indicative.)
Key features of Class A and B Notes
Class A-1 SG$ (3.40% p.a, SG$615m); Class A-2 US$ (5.70% p.a, US$200m)
- Strong credit rating and most senior in the priority of payments: The Astrea 9 Class A notes constitute the most senior notes in terms of the priority of payments under the Astrea 9 programme. Both A-1 and A-2 notes will be ranked pari passu (i.e., equally to each other). The A-1 notes are rated “A+ (structured finance)” while the A-2 notes are rated “A (structured finance)” by Fitch, representing fairly strong investment-grade ratings.
- Large offering size for both tranches of Class A Notes: Class A-1 notes are SGD-denominated, with S$615m expected to be issued (Private: S$ 235m, Public S$380m). While the underlying investments are primarily denominated in USD and EUR, the issuer has catered for a currency hedging mechanism to facilitate the SGD-denomination of the Class A-1 notes. Meanwhile, A-2 notes are USD-denominated, with US$200m expected to be issued (Private: US$ 150m, Public US$50m).
- Scheduled call date of 5Y, with a 15Y maximum tenor: Like Astrea 8 Class A notes, Astrea 9 Class A notes also have a maximum tenor of 15 years. That said, the notes have a mandatory call of 5 years (on a scheduled date) and will be redeemed if, on the call date, there is sufficient cash in the Reserves Account, with no outstanding Credit Facility loan. The Class A notes will not be redeemed prior to the scheduled call date (if on the call date, there are sufficient reserves to redeem only A-1 notes, A-2 notes will be redeemed on the following distribution date, if conditions are met). Simply put, if things go to plan, the Class A notes will be similar to 5-year bullet notes paying semi-annual coupons.
- Strong track record of call in previous series: We think that both notes are likely to be called. Per Azalea Asset Management (“Azalea”), Astrea series notes have had a strong track record of redemption upon the scheduled call date - 1) for Astrea III to Astrea V, all classes of notes have been redeemed on their call date, 2) for Astrea VI, all classes have already been fully reserved and will be called on their call date, 3) for Astrea 7 and 8, around 64% and 30% of Class A notes have been reserved respectively, and are on track to be called on schedule.
- What if things do not go as planned: In the unlikely event that cash flows are insufficient to redeem the Class A notes at the scheduled call date, a coupon step-up will apply to interest payments, providing investors with additional compensation. Holders of the Class A notes will continue to receive interest payments until reserves are sufficient to redeem the Class A notes in full (at a future distribution date).
- Maximum LTV ratio of 50%: A maximum loan-to-value (“LTV”) ratio cap is maintained at 50% for Class A notes. If the LTV ratio crosses the cap, 100% of the remaining cash flow (after paying expenses and interest for the notes) will go to the Reserves Account until 1) the total balance in the Reserves Accounts meets the Reserves Accounts Cap, or 2) the LTV ratio is below the cap). This structure incentivizes the issuer to manage risks prudently by penalizing it for having a high (>50%) LTV ratio.
Class B PIK US$ (7.35% p.a, US$100m)
- Payment-in-kind (“PIK”) structure means no cash coupons: PIK structure is where the interest at each distribution period is accrued (instead of being payable) and added to the original principal and forms part of the principal amount, compounded over time.
- Offering size of US$100m for institutional or accredited investors: Class B notes are USD-denominated, with US$100m expected to be issued. The notes are offered only to institutional or accredited investors in Singapore and outside the United States (not to retail investors in Singapore).
- Ranked lower in the priority of payments: Class B PIK notes will rank lower than their Class A counterparts in the priority of payments. The notes have a credit rating of “BBB (structured finance)” by Fitch which, according to the rating agency, reflects their subordination to the Class A notes as well as the amortisation, and PIK structure.
- 15Y maximum tenor but no maturity “floor”: Astrea 9 Class B notes also have a maximum tenor of 15 years, but with scheduled call dates, unlike their Class A counterparts. Therefore, bondholders for Class B notes must be prepared to “lock in”, without actual income for several years (likely until the full redemption of Class A notes).
- Mandatory partial redemption and amortisation will apply: Before the full redemption of Class A notes, Class B notes will accrue interest at each distribution date (instead of being payable). The interest will be added to the original principal, increasing the balance each time. Consequently, this will increase the next coupon payment (as the coupon rate is applied to a larger principal). After the full redemption of Class A notes, at every distribution date, 100% of the remaining cash flow (after paying taxes and expenses) will be used to repay the outstanding principal of Class B notes until they are fully redeemed.
- Maximum LTV ratio of 55%: A maximum loan-to-value (“LTV”) ratio cap is maintained at 55% for Class B notes. If the LTV ratio crosses the cap, and Class A notes are still outstanding, 100% of the cash flow will go to the Reserves Account until the total balance meets the Reserves Accounts Cap, and any remaining cash flow will be directed to the repayment of Class B notes’ outstanding principal. If the LTV ratio crosses the cap, and Class A notes have been redeemed, 100% of the cash flow goes to the repayment of Class B notes’ outstanding principal.
Our opinion on the pricing of Astrea 9 notes
|
Issuances |
Ask Price |
Yield to Call / Maturity |
Years to Call / Maturity |
Bond Credit Rating (Fitch*) |
|
SGD Class A-1 |
||||
|
105.83 |
2.78% / 4.44% |
3.97 / 13.97 |
A+ (sf) |
|
|
102.75 |
2.56% / 4.34% |
1.82 / 6.82 |
A+ (sf) |
|
|
100.58 |
2.05% / 3.71% |
0.63 / 5.63 |
AA- (sf) |
|
|
USD Class A-2 |
||||
|
107.69 |
4.60% / 6.07% |
4.97 / 13.97 |
A (sf) |
|
|
ASTLC 5.350% 27May2032 Corp (USD) - Class A-2 Classified as SIP |
100.15 |
5.26% / 5.99% |
1.82 / 6.82 |
A (sf) |
|
ASTLC 3.250% 18Mar2031 Corp (USD) - Class A-2 Classified as SIP |
98.80 |
5.23% / 4.29% |
0.63 / 5.63 |
A+ (sf) |
|
USD Class B |
||||
|
102.33 |
5.10% / 6.11% |
2.82 / 6.82 |
A- (sf) |
|
|
ASTLC 4.350% 18Mar2031 Corp (USD) - Class B Classified as SIP |
99.10 |
- / 4.53% |
- / 5.62 |
A (sf) |
|
Sources: Bondsupermart, iFAST Compilations. * “sf” suffix refers to structured financial instrument. Data as of 31st July 2025. ^Note that only the Class A-1 tranches, the Astrea 7 Class B tranche, and the Astrea 8 Class A-2 tranche are available for retail investors. |
||||
Class A-1 Notes
Comparing against previous Astrea A-1 notes, assuming a 5-year call, we would consider the 3.40% yield of A-1 notes to be attractively priced, taking into account the yield to call (“YTC”) of Astrea 8 A-1 notes (YTC: 2.78%) and Astrea 7 A-1 notes (YTC: 2.56%). Astrea 9 Class A-1 notes would represent a decent yield pickup of around 60 - 80bps against its Astrea 7 and 8 counterparts.
Comparing against the broader SGD issuance universe, we find the 3.40% yield of Class A-1 notes attractive. Firstly, the yield is higher than that of SGD Tier 2 banking notes with similar years to call, which are between 2.8% - 3.0% YTC (Table 2). Arguably, senior notes (which has lower yield) would make a fairer comparison in terms of credit rating, but we think Class A-1 bonds can be a good alternative to Tier 2 notes with similar call dates (Under Basel III regulations, Tier 2 notes that are not called back past their call date have to be amortised. This incentivizes the Banks to redeem their Tier 2 notes earlier).
Secondly, the yield of A-1 notes is higher than that of SGD REITs and property developers’ notes with similar years to maturity, which are trading between 3.1% - 3.3%. Issuances from SGD REITS and property developers are often popular and mostly unrated, with many carrying greater credit risk than Astrea Class A-1 notes. Lastly, the yield of A-1 notes is also higher compared to other SGD issuances that are either Temasek-linked or quasi-sovereign (considering Azalea’s Temasek-linked nature).
Overall, we find the Astrea 9 Class A-1 notes attractively priced. Considering the declining yield in the SGD bond space, Class A-1 notes will be a good option to lock in above 3.0% yield at a strong credit rating and pocket around 160bps yield pickup over the 5-year Singapore government securities, without taking on significant credit risk. We think that investors can view Class A-1 notes as alternatives to more "plain vanilla" 5Y SGD bonds available in the markets. In our opinion, both notes are unlikely to exceed their mandatory call dates given the reasons highlighted in the prior sections.
Table 2: Comparing Astrea 9 Class A-1 against other SGD notes
|
Issues |
Issuer |
Ask Price |
Yield to Call/ Maturity |
Years to Call/ Maturity |
Bond Credit Rating (S&P/Fitch) |
|
BPCEGP 4.600% 21Jan2035 Corp (SGD) |
BPCE |
106.50 |
3.03%/ 3.20% |
4.48/ 9.48 |
BBB/ BBB+ |
|
BNP 3.950% 15Apr2035 Corp (SGD) |
BNP Paribas |
104.85 |
2.84%/ 2.94% |
4.71/ 9.71 |
N.R/ A- |
|
HSBC 4.750% 12Sep2034 Corp (SGD) |
HSBC Holdings |
107.20 |
2.88%/ 3.23% |
4.11/ 9.12 |
BBB/ A- |
|
SLHSP 3.500% 29Jan2030 Corp (SGD) |
Shangri-La Hotel |
101.15 |
-/ 3.22% |
-/ 4.50 |
N.R/ N.R |
|
FSGSP 3.495% 14May2030 Corp (SGD) |
First Sponsor Group |
101.00 |
-/ 3.26% |
-/ 4.79 |
N.R/ N.R |
|
SUNSP 3.400% 27Mar2031 Corp (SGD) |
Suntec REIT |
101.25 |
-/ 3.15% |
-/ 5.66 |
N.R/ N.R |
|
Sources: Bondsupermart, iFAST Compilations. Data as of 31st July 2025. |
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Class A-2 Notes
Generally, we find Class A-2 notes more attractive compared to USD banking notes. Class A-2 notes have a higher yield against “A” rated USD Tier 2 banking notes with similar years to call, which are trading at a YTC of between 4.9% - 5.1% (Table 3). These mostly include the Australian Big Four Banks, which holds strong credit ratings. Against lower-rated, “BBB” USD Tier 2 papers (Table 3) – from Standard Chartered and Deutsche Bank - the yield of Class A-2 notes is also higher.
On balance, we find the Class A-2 notes attractive. Given the strong credit rating, Class A-2 notes will also be a good option for investors looking for a durable USD income of around 5-6% yield, over an intermediate period. We think Class A-2 notes can be a good alternative for USD senior and Tier 2 banking notes. Like Astrea 9 Class A-1 notes, we think that investors can view Class A-2 notes as alternatives to more "plain vanilla" 5Y USD and bonds.
Table 3: Comparing Astrea 9 Class A-2 against other USD notes
|
Issues |
Issuer |
Ask Price |
Yield to Call/ Maturity |
Years to Call/ Maturity |
Bond Credit Rating (S&P/Fitch) |
|
BZLNZ 5.698% 28Jan2035 Corp (USD) |
Bank of New Zealand |
102.20 |
5.14%/ 5.20% |
4.71/ 9.71 |
A/ N.R |
|
ANZNZ 5.898% 10Jul2034 Corp (USD) |
ANZ Bank New Zealand |
102.90 |
5.07%/ 5.27% |
3.94/ 8.94 |
A/ N.R |
|
CBAAU 3.610% 12Sep2034 Corp (USD) |
Commonwealth Bank of Australia |
95.00 |
4.98%/ 5.41% |
4.12/ 9.13 |
A-/ A- |
|
STANLN 3.265% 18Feb2036 Corp (USD) |
Standard Chartered |
90.05 |
5.46%/ 5.63% |
5.30/ 10.56 |
BBB-/ BBB+ |
|
DB 5.882% 08Jul2031 Corp (USD) |
Deutsche Bank AG/New York NY |
103.10 |
5.13%/ 5.83% |
4.69/ 5.94 |
BBB-/ BBB |
|
Sources: Bondsupermart, iFAST Compilations. Data as of 31st July 2025. |
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Class B PIK bonds
Overall, we think the appeal of Class B PIK notes comes from the high 7.35% yield, which provides interest return (in this case, interest that is accrued) that is similar to that of high-yield bonds. This gives investors the opportunity to augment the yield of their bond portfolio, without taking on significant credit risk, as compared to investing in a high-yield bond. Despite no maturity “floor” and a lengthy tenor of 15 years, Azalea’s strong track record of redeeming past Astrea bonds provides some reassurance. We find the Class B PIK notes more suitable for 1) investors with a greater risk appetite and are looking for higher yields, and/or 2) those who are comfortable being "locked in“, without actual income for several years.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) hold a position in ASTLC 6.000% 27May2032 Corp (USD) - Class B and ASTLC 3.250% 18Mar2031 Corp (USD) - Class A-2, and the analyst who produced this report hold a NIL position in the abovementioned securities.
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