Astrea V is providing 3 lessons of bonds of which S$180m of the Class A-1 Bonds (“the Bonds”) can be found to retail buyers. The general public provide will finish on 18 June 2019 at 12 midday.
The remaining $135m Class A-1, US$230m Class A-2 and US$140m Class B Bonds had been already absolutely positioned out by a placement tranche.
Particulars of the three completely different lessons of bonds are summarised beneath:
Key factors to notice in regards to the Class A-1 Bonds:
- Rate of interest of three.85% every year
- Curiosity is payable each 6 months on 20 June and 20 Dec every year
- The Bonds can be redeemed on 20 June 2024 (5 years) if situations are met.
- The Bonds are anticipated to be rated A by Fitch and A+ by SnP.
- There can be a bonus of 0.5% of the principal quantity for Class A-1 if the Efficiency Threshold is met.
I’m not going to repeat the nice work executed by different bloggers:
As well as, the Issuer has spent a of efforts to teach buyers on how what’s personal fairness and the way Astrea V PE Bonds work. Go watch the Explainer Video beneath
and hearken to the administration presentation beneath.
You’ll find all of the sources you want on its web site here. Do not be lazy! 😆
The construction can be extremely much like Astrea IV, you’ll be able to learn my write up here.
As such, on this put up, i can’t repeat what the administration has already stated however will contact on 5 key factors that buyers will doubtless need to know.
1. How was the three.85% Curiosity Charge Set and is it comparatively enticing?
In accordance with management, the rates of interest for all the three tranches had been priced by establishments and the identical price for Class A-1 was then supplied to retail buyers, that means that the rate of interest was set by a correct e-book constructing course of.
The position tranche was 7.3x subscribed (round US$3.4 billion obtained) and 70% had been positioned out to top quality establishments comparable to Insurance coverage, Endowment and Foundations. The remaining 30% had been positioned out to excessive web value people. In the event you recall, Astrea IV was “solely” 4.5x subscribed.
There was a big step up in orders from Institutional Buyers, that means that the PE Bonds has now gained wider acceptance since its first launch in 2016. This led to extra contributors for the providing and thereby decreasing the speed (sadly for us).
In accordance with my pal working within the mounted earnings division of one of many main insurance coverage firm right here, the Class A-1 e-book was very extremely popular buyers, with over 10x demand for the S$135m bonds. Many buyers had been in the reduction of drastically. In his phrases
Issuer might have tighten the Class A-1 pricing all the way in which down however have determined to go away “some cash on the desk”, most likely to profit retail buyers.
Investment Moat has done some analysis on the present buying and selling ranges of Astrea IV. Nevertheless, he has used the yield to maturity to 10 years which is definitely not proper as Astrea IV PE Bond for Class A-1 is most probably (99%) going to be redeemed at finish of 12 months 5. In accordance with the identical bondsupermart website, the yield to name for Astrea IV Class A-1 is round 2.124%. Together with the 0.5% rate of interest, the yield to name is round 2.27% primarily based on the final traded value of 1.065.
On this regard, the Astrea V Class A-1 Bonds of three.85% is definitely fairly enticing in comparison with the present buying and selling ranges of Astrea IV Class A-1 Bonds even while you add in a one 12 months extension premium.
If I take a look at the place the buying and selling ranges of Astrea IV Class A-1 Bond is at present, there’s most likely some upside however do be aware that this “upside” is meaningless if one buys at IPO and maintain until maturity because the returns are mounted at 3.85%.
If I evaluate in opposition to the danger free Singapore Financial savings Bonds, the 5 12 months common curiosity is now 1.98%. As such, at 3.85%, the unfold is round 187 bps. In the event you intend to carry until maturity, you’ll have to decide for your self whether or not you’re higher off incomes a decrease curiosity of 1.98% within the SSB or earn the three.85%
2. Is Astrea V portfolio higher than Astrea III and Astrea IV?
We additionally see comparable feedback from Fitch whereby its says that 84% of the funds within the Astrea V portfolio are within the high 3 quartiles and 54% of the funds publicity are within the high 2 quartiles. In the event you superimposed the funds quartile on the historic efficiency of the funds within the completely different area, you’ll know that this portfolio is a “strong” one with nice potential to outperform the median circumstances.
My conclusion is that this portfolio is even higher than that of Astrea III and Astrea IV as a youthful portfolio has extra upside potential. The money circulation will turn into generative over the following 5 years and this may be capable of meet the money circulation wants of Astrea V.
3. How has Astrea III and Astrea IV carried out? Does it has any bearing on Astrea V?
The reply isn’t any and sure.
Astrea III has carried out properly and the bonds have been upgraded. The LTV has additionally fallen to round 31% in Jan 2019. As well as, the Class A-1 bonds of three years (3.9%) can be absolutely redeemed in July this 12 months.
No – Every Astrea is completely different and distinctive and the belongings are ring-fenced. Previous efficiency can be not an indicative of future efficiency.
Sure – You possibly can see that the Supervisor has established a powerful monitor file. I assume that’s a part of the rationale why we see extra institutional contributors in Astrea V as monitor file do imply one thing.
4. Will we doubtless see a default much like Hyfliux or Swiber? Is there a chance that i’ll lose my capital?
The reply is that default danger may be very distant. Whereas the schedule name is on 12 months 5, the authorized maturity is 10 years. Within the occasion that buyers get prolonged, then Class A-1 bonds holders are compensated with a step up in rate of interest.
Let’s analyse what the default danger is for Class A-1. The Issuer has executed some extreme stress testing utilizing historic knowledge. (Learn web page 141 onwards). You possibly can see from the desk that beneath extreme stress testing, Class A-1 can be paid on 12 months 5.5 and Class A-2 in 12 months 7 (because of the timing precedence in redeeming Class A-1 forward of Class A-2).
As well as, that was validated by an impartial third social gathering analysis guide from Harvard. You possibly can see from the chance desk beneath that Class A-1 will at most be delayed until 12 months 6 (twelfth interval) however 99.3% probability that they are going to be redeemed in 12 months 5.
SnP additionally concluded that its modeling outcomes gave Astrea V Class A-1 a “AAA (sf)” ranking however was unable to provide it such a ranking as a consequence of its ranking constraints. “AAA sf” ranking is definitely fairly near a “Temasek” ranking and fairly uncommon in as we speak’s world. I’d enterprise to say that the danger of low for Class A-1 may be very very distant. If you consider it, provided that the reserves is on a straight line foundation over 5 years, we solely want 2.5 years of scheduled reserves to completely de-risk Class A-1 Bonds as they’ve a timing precedence within the redemption at finish of 12 months 5!
I used to be making an attempt to tie the portfolio worth to the loans issued and was wanting on the monetary statements and money circulation of Astrea V. Provided that the portfolio is newly acquired, i famous that there’s a $70m money within the steadiness sheet. That is most likely the “leftover” money from the portfolio acquisition. In different phrases, the true “Mortgage to Worth” of Astrea V is definitely a lot decrease, at 43% if we embrace the start money balances.
Lastly, the final query that you just need to know:
5. What’s your IPO Chilli scores and the way do I get some shares?
As you’re conscious, my chilli scores are designed for fairness IPOs and bonds aren’t meant for “flipping”. In the event you pressure me to make use of the identical scores on Bonds, i’ll give it a 3 Chilli for the very very low chance of default and a 2 chilli ranking for the rate of interest. Whereas it’s priced attractively comparatively to the present buying and selling ranges of Astrea IV, i might however desire to see the bonds paying a extra enticing coupon of no less than a 4% deal with.
So coming again to allocation, that is the paradox we face. No person “desires” the SQ bond and you might have gotten near what you requested for as Firm can simply upsize the issuance. In Astrea V, you’ll be able to’t. The bonds are mounted at S$180m and this must be shared with all of the candidates.
So what’s the utility technique?
Within the gatefold, the Firm really acknowledged its allocation coverage. That is the primary time i ever see that an allotment coverage being talked about. Which means the Issuer most likely know that primarily based on prior subscription of seven.4x, Astrea V goes to be equally over-subscribed and want to let buyers learn about this “allocation coverage”.
I’ve no challenge with such an allocation coverage, in truth, i’m really glad to see that they’re being upfront about it and hearken to suggestions from buyers. I’m simply undecided if all of the candidates who utilized for $50,000 or extra will know that they’re topic to poll as they might have wrongly assumed that the allocation coverage would be the identical as Astrea IV.
So my prediction is that this (assuming identical subscription price as Astrea IV):
In the event you apply for lower than $50,000, you will be allotted $5,000 or much less. (perhaps barely extra because of the larger issuance this time)
In the event you apply for greater than $50,000, it is best to get no less than “double” of what you bought final time in every band.
In the event you management many CDP accounts (spouse, child, grandfather, grandmother) and you plan to carry until maturity, then it’s higher to unfold your functions (say $20k per utility) round to as many functions as you’ll be able to. If you do not have the posh and also you belief solely your individual CDP and but nonetheless need to get extra shares, then I’d encourage you to simply go for it. 😂
Utilizing the instance of making use of $20,000 every utilizing 5 accounts, you’ll doubtless get 5 x $5,000 = $25,000 bonds. In the event you apply for $100,000, then you’re topic to poll and if the fortunate stars shine on you, then chances are you’ll get $14,000 value of bonds.
Do you need to bao tiok (100% get allotted) or do you need to tikam (poll) in change for a extra significant allocation? That is the vote for as we speak!
Polling Time – Are you going to use for Astrea V Class A-1 Bond?