Are Astrea 9 PE bonds worth buying?

Summary

• Offer of Astrea 9 PE bonds: Astrea 9 has launched a public offer of S$380 million of Class A-1 Bonds at a fixed interest rate of 3.4% per annum, and US$50 million of Class A-2 bonds at a fixed interest rate of 5.7% per annum. Astrea 9 is backed by cash flows from a portfolio of 40 private equity funds that invested in 1,086 companies across diversified industries and geographies. The portfolio is valued at US$1,625 million as at end-2024. The manager of Astrea 9 Pte Ltd is Azalea, an indirect 100%-owned subsidiary of Temasek Holdings. The PE Bonds are not guaranteed by any party, including Temasek Holdings.

• Proven issuer track record. The bonds will mature in 15 years in August 2040. The Class A-1 and Class A-2 bonds both have a mandatory call at the 5th year, subject to certain conditions. There will be a one-time interest step up of 1.0% per annum if these are not redeemed at the call date. We note that the Astrea III, IV and V bonds were all redeemed on their scheduled call dates before their maturity. While the bonds are not guaranteed by any party, there are structural safeguards such as the reserves accounts mechanism, maximum loan-to-value (LTV) ratio of 50%, and credit facility if cash flow shortfall occurs. 

• Higher yield compared to existing Astrea bond issues. The yield to call of the Class A-1 bonds of 3.4% is above the 2.79% for the existing Astrea 8 A-1 S$ issue, and the 5-year Singapore government bond yield of 1.78% as of 31 July 2025. Likewise, the yield to call of 5.7% for Class A-2 bonds is above the 4.48% for the existing US$-denominated Astrea 8 A-2 issue, as well as the 5-year US government bond yield of 3.96% as of 31 July 2025. 

• We believe Astrea 9 bonds may be attractive for investors seeking regular income for a longer duration, given the track record of past Astrea series and safeguards in place. We prefer Class A-1 bonds due to the attractive yield premium compared to existing Astrea S$ series, with no direct US Dollar currency risk. Key risks include liquidity risk, leverage risk, amongst others. Class A-2 bondholders whose investment currency base is not in US dollars may face exchange rate risks from the US dollar denominated bonds.

Offer of Astrea 9 PE Bonds

Astrea 9 offers two classes of bonds, Class A-1 and Class A-2. 

Astrea 9 PE Bonds backed by cash flows from US$1,625 million portfolio of investments in 40 private equity (PE) funds across 1,086 Investee Companies. 

The investments are diversified across regions, sectors, and vintages. 

Compared to Astrea 8, a higher share of the Class A-1 bonds has been set aside for the public offer to retail investors in Singapore. 

Class A-1 Bonds

The Issuer will offer S$615 million in aggregate principal amount of Class A-1 Bonds, consisting of:

1. Class A-1 Public Offer: S$380 million to retail investors in Singapore.
2. Class A-1 Placement: S$235 million to institutional and other investors in Singapore as well as elsewhere outside the U.S.

Class A-2 Bonds

The Issuer will offer US$200 million in aggregate principal amount of the Class A-2 Bonds, consisting of:

1. Class A-2 Public Offer: US$50 million to retail investors in Singapore.
2. Class A-2 Placement: US$150 million to institutional and other investors in Singapore as well as elsewhere outside the U.S.

The key features of each class are summarised in the following table:

Issuer has proven track record 

The PE Bonds are issued by Astrea 9, an indirect wholly-owned subsidiary of Azalea.  

Azalea is a wholly-owned subsidiary of Seviora Holdings and an indirect wholly-owned subsidiary of Temasek Holdings (Private) Limited. 

The Astrea Platform develops a series of investment products based on diversified portfolios of PE Funds. 

Azalea was established in 2015 with a mandate to broaden investor access to private equity. Since 2016, Azalea has launched six series of Astrea PE bonds.

Diversified portfolio of PE funds

Astrea 9 is backed by cash flows from a diversified portfolio of 40 private equity funds which invested in 1,086 companies across diverse industries and geographies. 

Learn more about private equity (PE) here.

The net asset value of the portfolio was US$1,625 million as of 31 December 2024.

The portfolio has exposure to major investment regions, including North America, Europe and Asia. 

As of 31 December 2024, the portfolio breakdown is summarised in the following figure and table:

The fund investments were invested across diversified sectors, with information technology representing the largest exposure at 31% of the net asset value as of 31 December 2024. 

This is followed by industrials (21%), healthcare (15%), and the financials sector (8%). None of the portfolio companies represent more than 0.9% of the entire net asset value of the portfolio. 

Key investment strategies employed by PE Funds are buyout and growth equity. The Buyout strategy has the strongest historical performance among PE strategies historically. 

The top three PE fund managers (General Partners) for Astrea 9 are Thomas Bravo (5.9%), Warburg Pincus (5.4%), and TA Associates (5.4%). 

The top three fund investments are Warburg Pincus Global Growth, L.P. (3.8%), Triton Fund V L.P. (3.6%) and TPG Partners VIII, L.P. (3.6%).

The weighted average fund age is 5.5 years. 

Across vintage years, about 26% of the fund investments were made in each of 2019 and 2020, followed by 20% in each of 2018 and 2021. 

Because of the private equity J-Curve effect, net cash flows are expected to accelerate from year five onwards, with mature funds more likely to generate cash flow.

Priority of Payments

Astrea 9 will receive cash from the portfolio of PE fund investments when the underlying investments are sold. 

At the end of every semi-annual distribution period, the available cash flow will first be used to pay for tax and expenses, hedge counterparties, manager, and credit facility. 

Thereafter, they will be used to pay for the interest for the Class A-1 and Class A-2 bonds. 

The Class A-1 Bonds and Class A-2 Bonds have the same seniority, without any preference or priority among themselves. 

Structural safeguards in place 

The Astrea PE bonds are designed with safeguards for bondholders, including the following:

• Reserves Accounts Mechanism: Cash build-up to repay principal amounts of bonds
• Maintain LTV ratio below 50%: Cross the debt level limit of 50% triggers the lowering of total net debt
• Credit facility: To fund certain expenses and capital calls for fund investments, if cash flow shortfall occurs.

Reserve Accounts Mechanism

The Reserves Accounts Mechanism allows cash build-up to repay the principal amounts of the Bonds. 

While any of the Class A-1 and Class A-2 Bonds are outstanding, the cash will flow into the Reserves Accounts for the redemption of the Class A-1 and Class A-2 Bonds. 

If the Class A maximum Loan-To-Value (LTV) ratio has been exceeded, 100% of the cash flows remaining after application of Clause 1 through Clause 7 of the priority of payments will be paid to the reserve accounts. 

After the Class A-1 and Class A-2 Bonds have been fully redeemed, 90% of the cash remaining after application of Clause 1 through Clause 8 will flow to the repayment of the outstanding principal amount of Class B PIK Bonds. 

Available cash may also flow into the Reserves Accounts earlier if either the Disposal Option is exercised, or the Maximum Loan-to-Value Ratio has been exceeded.

If the reserves are insufficient for the full redemption of the Class A-1 or the Class A-2 Bonds, there will be a one-time 1.0% per annum step-up in their respective interest rates at the call date.

Maximum Loan-to-Value (LTV) Ratio Below 50%

The Loan-to-Value (LTV) ratio is capped at 50%, which is higher than the 40% for the recently issued Astrea 8 bonds but in line with the 50% for earlier Astrea series. 

If this is breached, additional distributions have to be deposited into the Reserves Account to lower the LTV to 50% before any distribution to equity investors. 

The bond offering will raise US$780 million, or 48.0% of the portfolio value of US$1,625 million as at end-2024 (loan-to-value or LTV). 

The LTV ratio at issuance may mitigate risk of loss, as the portfolio will need to lose 52.0% of its value before bondholders are impacted. 

In addition, there is an alignment of interest with bondholders, as the sponsor Azalea which owns 100% of the equity will take first loss. 

Credit Facility 

In the event of cash flow shortfalls, the Issuer may draw on the facility provided to fund certain expenses and other amounts payable (including unpaid accrued interest on the Class A-1 and the Class A-2 Bonds) and Capital Calls. 

However, the Credit Facility cannot be used to repay any principal amount on the Bonds.

Key risks of Astrea 9 PE Bond

There are various risks associated with investing in Astrea 9 PE Bonds, including investment risks, market risks, leverage risks, amongst others. In addition, Class A-2 bondholders whose investment currency base is not in US dollars may face exchange rate risks from the US dollar denominated bonds.

Investment Risks

As the Astrea 9 bonds are backed by cash flows from a portfolio of private equity funds, there are investment risks due to the nature of private equity fund investments. In particular, the amount and timing of distributions from the private equity funds are uncertain. 

In addition, there is limited disclosure on the performance of the underlying investee companies. As such, it may be difficult to keep track of any decline in the returns or cash flows of the fund investments. 

Market Risk

Any adverse change in macroeconomic conditions may result in declining private equity asset valuations and deal activities. This may result from events such as rising inflation and interest rates, rising geopolitical tensions, and global pandemics. Such market developments may also lead to less distributions from the private equity fund investments if exits on the investee companies happen during a period of declining asset valuations or deal activities. 

Leverage Risk

The use of leverage by a private equity funds may increase the exposure of Investee companies to adverse financial or economic conditions, which in turn may impact their ability to finance operational and capital needs. This may then lead to less distributions received from the private equity fund investments. 

Liquidity Risk

The trading market for the bonds may be limited, and there is no assurance that the bonds may be able to be sold at an attractive price. In addition, there is no certainty as to when the bonds would be fully redeemed before the Maturity Date.

Exchange Rate Risk

As the Class A-2 bonds are US dollar denominated, bondholders whose investment currency base is not in US dollars may be subject to exchange rate fluctuations. In particular, a sharp depreciation of the US dollar may lead to foreign exchange losses for Class A-2 bondholders whose investment currency base is not in US dollars. 

Decent yield compared to existing Astrea issuances

We compare the bonds with existing outstanding Astrea series, which are also invested in PE funds managed by Azalea with similar features. 

The Astrea 9 A-1 bond offers a yield of 3.4%.

Existing Astrea S$-denominated issues are priced at a yield to call (YTC) of 2.82% for the Astrea 8 A-1 bond and 2.64% for the Astrea 7 A-1 bond, as of 31 July 2025. Hence, the Astrea 9 A-1 bond offers a spread of 0.58% and 0.76% over the Astrea 8 Class A-1 bond and Astrea 7 Class A-1 bond, respectively. 

The 5-year Singapore government bond offers a yield of 1.78% as of 31 July 2025. As such, the Class A-1 Bonds offer a yield spread of 1.62% over the Singapore government bond. 

The Astrea bonds should offer a higher yield compared to Singapore Government Securities due to the higher inherent risks of the underlying private equity funds, in our view.

The Astrea 9 A-2 bond offers a yield of 5.7%.

The yield to call (YTC) of the Astrea 8 Class A-2 bonds is at 4.85%. Consequently, the Astrea 9 A-2 bond offers a spread of 0.85% over the Astrea 8 Class A-2 bond . 

The 5-year US government bond offers a yield of 3.96% as of 31 July 2025. Hence, the Class A-2 Bonds offer a yield spread of 1.74% over the US government bond. The wider spread for Class A-2 bonds is likely due to wider range of investment options in the US dollar debt market, and concerns around the depreciation of the US Dollar. 

Given the above, we believe Astrea 9 PE bonds offer a decent yield and would prefer Class A-1 bonds for the yield premium to existing Astrea S$ issues with no exposure to US Dollar risk. 

What would Beansprout do?

We believe Astrea 9 PE bonds may be attractive for investors seeking regular income over a longer duration, given the track record of past Astrea series and safeguards in place. 

We prefer Class A-1 bonds over Class A-2 bonds for the yield premium to existing Astrea S$ issues. 

However, we would need to be aware of the various risks associated with investing in Astrea 9 PE Bonds, including investment risks, market risks, leverage risks, amongst others. 

In addition, Class A-2 bondholders whose investment currency base is not in US dollars may face exchange rate risks from the US dollar denominated bonds.

Also, find out other ways that you can generate passive income in Singapore.

I have seen many questions in the Beansprout Telegram group about the Astrea 9 PE bonds, and I will try to also address some of them below.

How to apply for Astrea 9 PE bonds?

You may apply for the Astrea 9 PE Bonds through ATM, internet banking and mobile banking via DBS, POSB, OCBC and UOB.

You will require a CDP account to apply for the Astrea 9 PE Bonds.

• The public offer for the Astrea 9 PE bonds open from 9am on 31 July 2025, and will close at 12 noon on 6 August 2025 (Wednesday).
• The Class A-1 Bonds and Class A-2 Bonds are expected to list and start trading on the Mainboard of the SGX on 11 August 2025 (Monday).

You may apply for both the Class A-1 bonds and Class A-2 bonds. 

• The minimum application for the Singapore dollar denominated Class A-1 bonds is S$2,000 per application, and the bonds will be traded in denominations of S$1,000.
• The minimum application for the US dollar denominated Class A-2 bonds is US$2,000 per application, and the bonds will be traded in denominations of US$1,000. 

You may only apply for the Astrea 9 PE Bonds using cash. Applications for the Astrea 9 PE bonds using CPF or SRS are NOT allowed. 

You may apply using one of the following manners: 

1. ATMs of DBS (including POSB), OCBC and UOB
2. Internet banking websites of DBS (including POSB), OCBC and UOB
3. Mobile banking application of DBS (including POSB), OCBC and UOB 

You can make an electronic application for the Class A-2 Bonds in the same way as Class A-1 Bonds.

While the Class A-2 Bonds are US$ denominated, applications for these Bonds will be made in S$ based on a predetermined exchange rate of US$1 to S$1.2852. 

All refunds of unsuccessful or partially allocated applications will also be credited in S$ based on the same predetermined exchange rate of US$1 to S$1.2852 during application.  

Are there any fees for applying for the Astrea 9 PE bond?

A non-refundable administrative fee of S$2 is paid by the applicant for each application. 

Would I receive interest and principal payments for Class A-2 bonds in US$ or S$?

The Class A-2 Bonds are denominated in US$, and all interest and principal payments are made by the Issuer in US$.

If you hold the bonds through CDP and have activated the Direct Crediting Service, you will receive the payments in Singapore dollars (S$) by default. The US$ amounts will be converted to S$ at an exchange rate determined by CDP’s partner bank.

If you prefer to receive the payments in US$ instead of S$, you can opt out of the default conversion via CDP Internet. In this case, the US$ payments will remain in your CDP cash balance until you request a withdrawal. Please note that telegraphic transfer fees and receiving bank charges will apply for each withdrawal.

You can find out more here https://www.sgx.com/cdpfaqs. 

How much allocation of the Astrea 9 PE bonds will I get?

Based on the balloting ratio of Astrea 8 PE bonds, all valid applicants who applied for less than S$50,000 of Class A-1 Bonds received allocations either in full or in part. 

Investors who applied for S$9,000 and below of Class A-1 Bonds received full allocation.

Investors who applied for S$10,000 to S$29,000 of Class A-1 Bonds received S$9,000 allocation.

Investors who applied for S$30,000 to S$49,000 of Class A-1 Bonds received S$10,000 allocation.

Based on the balloting ratio of Astrea 8 PE bonds, all valid applicants who applied for less than US$50,000 of Class A-2 Bonds received allocations either in full or in part. 

Investors who applied for US$4,000 and below of Class A-2 Bonds received full allocation.

Investors who applied for US$5,000 to US$9,000 of Class A-2 Bonds received S$4,000 allocation.

Investors who applied for US$10,000 to S$29,000 of Class A-2 Bonds received US$5,000 allocation.

You can find out the allotment result of the Astrea 8 PE bonds here.

However, do note that the actual allotment of the Astrea 9 PE bond may differ from the Astrea 8 PE bond, as it will eventually depend on the amount of applications for the bond.

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