If you’re an income investor, you’re likely very interested in the Astrea 8 bond, and the allocation has finally been concluded. Here’s a quick update on the latest developments.

What Are Astrea 8 PE Bonds?

Astrea 8 PE Bonds are Private Equity Bonds issued by Azalea Asset Management, which is indirectly owned by Temasek Holdings. These bonds are backed by cash flows from a portfolio of private equity funds. For a detailed write-up on this tranche of Astrea 8 Bonds, check out my previous article here.

Additional Reading: Is Astrea 8 IPO Worth Investing? An In-Depth Look at Singapore’s Latest Retail PE Bonds

In a nutshell, Astrea bonds have a strong track record and credit quality, making them one of the most popular bonds in Singapore.

After all, there are very limited options available to retail investors in Singapore. Most bonds typically demand a minimum subscription amount of $250,000 or USD 200,000. iFast and Great Eastern issued two lower denomination bonds recently, even though these require investors to be Accredited Investors to participate.

Astrea 8 Bond Subscription and Balloting Result

As I mentioned in my earlier article, you could subscribe to Astrea 8 bonds through Private Placement or Public Offer. Since Astrea V was just fully called back by the issuer, the enthusiasm for the Astrea 8 bonds was not surprising.

Here are some key points:

• The overall subscription for Astrea 8 PE Bonds was 2.8 times the US$585 million offered.
• Public Offers for both classes received over S$1 billion in total subscriptions, making it 3.1 times oversubscribed.
• The subscription rate for Class A-1 Bonds (in SGD) was about 2.9 times, and for Class A-2 Bonds (in USD), it was about 3.9 times.
• More than 76% of the Public Offer bonds were allocated to applicants who applied for less than S$50,000 (Class A-1) or US$50,000 (Class A-2).

The detailed balloting results are shown in the table below:

#1. Private Placement Tranche

#2. Public Offer Tranche

Here is how you can interpret the table, using A-1 Bonds as an example:

• If you applied $9,000 and below, you get full allocation.
• If you applied $10,000 to $29,000, you get a $9,000 allocation.
• If you applied $30,000 to $49,000, you get a $10,000 allocation.
• But if you apply above $50,000, say $50,000 to $74,000, you have to enter a ballot, and you have a 50% chance of getting a $24,000 allocation.
• So on and so forth…

From the table, we can see that:

• All valid applicants in the Public Offer who applied for less than S$50,000 (Class A-1) or US$50,000 (Class A-2) received full or partial allocations.
• Over 74% of Class A-1 Bonds (in SGD) and 85% of Class A-2 Bonds (in USD) were allocated to smaller applicants.

This indicates that the bond issuer aims to benefit a broader retail investor base, particularly smaller investors. This is also mentioned in the preliminary prospectus which I talked about earlier.

You Can Trade Astrea 8 Bonds, But Take Note…

Astrea 8 PE Bonds will start trading on SGX-ST at 9:00 am on Monday, 22 July 2024. If you didn’t bid or didn’t receive as many Astrea 8 bonds as you desired, you can purchase them from either the Singapore Exchange or the secondary Bond OTC (Over-The-Counter) market.

Here are a few things I want to highlight to you:

• Set a Limit Price: Bonds generally have lower liquidity. Set a limit price when buying to ensure you don’t overpay. After all, you are just getting a small interest from a bond. A 1% overpayment is a lot! I’ve seen many retail investors have been outplayed by professionals because of this.
• Accrued Interest: When purchasing bonds, you need to pay for accrued interest, which is the interest that has accumulated since the last coupon payment. Make sure you understand how this affects your trading price.
• Transaction Costs and Credit Spread: Be aware of transaction costs (brokerage fees) and the spread (the difference between the Bid price and Offer price). Transparency in this area can sometimes be lacking, so do your due diligence. Engage a professional if you do not understand.

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Conclusion

Astrea 8 PE Bonds offers Singapore investors like you and me a chance to participate in a high-quality bond with a reasonable yield. If you have any questions or need further information, feel free to comment below.

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