The Manager held a Live Q&A session on 12 March 2021 to answer some of your queries about the Astrea VI PE Bonds. We have made the answers to some of these questions available below as well.

To all attendees, thank you once again for participating in in the Live Q&A Session!

Management Presentation

A recording of the presentation has been made available here for your reference.

Q&A

Astrea VI Bond Features and Structure

1. What is the frequency of interest payouts in relation to the Class A-1 Bonds?  

The Class A-1 Bonds 3% per annum coupon is paid out semi-annually, up to the redemption of the bonds.

2. How do I redeem the bond at maturity?  

No action is required. Upon redemption, your principal will be deposited into the bank account linked to your CDP account.  

3. What is the duration of the Astrea VI bonds - when do they mature? 

The Class A-1 Bonds have a Scheduled Call Date at the end of year 5, if the following conditions are met: the cash set aside in the reserves accounts is sufficient to redeem all Class A-1 Bonds; and there are no outstanding Credit Facility loans 

4. Is there any performance fee imputed in the management fee calculation and if yes, is there a high watermark used?

There is no performance fee. Management fee is a fixed rate per distribution period based on Total Portfolio NAV as of the Distribution Reference Date. 

The bondholders do not pay any management fees. These are paid through the transaction structure.

5. Interest rates on the Class A-1 Bonds have been coming down since your first retail issuance (Astrea IV). Will it be lower than 3% for the next Astrea?

We are unable to comment on future Astrea bond issuances. 

Since Astrea III, interest rates for our PE bonds have been determined through a competitive book-building process by institutional investors. These investors include insurance companies, endowments, asset managers and hedge fund managers. The same rate set by these investors is used for the retail offering. 

Important factors that institutional investors look out for during the book building process include interest rate outlook as well as the quality of the issuance.

6. What is the probability of redemption at the 5th year?

The ability of the Issuer to redeem the bonds at the 5th year depends on the cash flows received from the Transaction Portfolio.

According to the Independent Consultant Report in the prospectus, their simulation scenarios results indicate an almost 100% probability that the Class A-1 Bonds will be redeemed. Please note that these scenarios are backward-looking and hypothetical in nature.

It is mandatory for the Issuer to redeem Class A-1 Bonds on the Scheduled Call Date of 18 March 2026 if conditions above are met. If not, redemption will take place in any subsequent period when such conditions are met.

7. So technically we are providing a loan at 3% interest - correct?

Yes.

8. Will recent organisation changes at Temasek and Seviora impact the Astrea bonds?

Azalea is managed independently with its own Board and Management Team.    

9. I saw on some website that the interest rate of the Class A-1 bonds is stated as 3.25%. Was this the initial interest rate before or during the book building process?

Yes, 3.25% was the initial price guidance as part of the book building process. The final interest rate of 3% was based on demand from institutional investors who set the interest rate and the same rate is offered to retail investors.

10. Can you share how Azalea makes money from the issuance of such Astrea III, IV, V, VI bonds?

Azalea owns 100% of the equity of Astrea III-VI and will receive the equity returns on these investments.

11. How often will the portfolio be rebalanced?

The portfolio is not structured as an active portfolio and there is no rebalancing.

12. If the Class A-1 bond is not redeemed at the end of Year 5, what is the redemption plan? Can it be redeemed any time after Year 5 if conditions are met?

If the Class A-1 bond is not redeemed at the end of year 5, the annual interest rate will step-up one-time to 4% after this date. The Maturity Date of 18 March 2031 is the latest date on which the bonds will be redeemed in full.

13. Can the reserves be tapped on?

The amounts in the Reserves accounts cannot be withdrawn by the sponsor and can only be used for the repayment of the Class A bonds. (In the event of default these will be applied according to the post-enforcement Priority of Payments)

The amounts can be invested in eligible deposits or investments according to the strict rating criteria as set out in the prospectus.

14. Has Temasek itself invested in Astrea VI?

Azalea is the 100% equity owner of the Astrea VI transaction. Azalea is an indirectly wholly-owned subsidiary of Temasek.

Bond Performance and Trading

15. Do the Astrea VI Class A-1 Bonds have a lock-up period? Is there any capital upside for bondholders?

The Class A-1 Bonds have a non-call period of 5 years. The bonds can only be redeemed on the Scheduled Maturity Date at end of year 5. These Class A-1 Bonds are listed and traded on SGX. Bondholders may trade the Bonds at any time subject to prevailing market price and availability. 

As this is a bond instrument, there is no capital upside and the bonds will be redeemed at par. However, a 0.5% Bonus Redemption Premium will be paid to Class A-1 Bondholders if the Performance Threshold is met. 

16. For your previous Astrea PE bonds, were the credit facilities ever drawn?

None of the credit facilities in Astrea III, IV and V were drawn.  

Please visit the Azalea website for the latest updates on these transactions.

17. Can you give us an overview of performance of past tranches?

All bond obligations have been met to date. Class A-1 bonds of Astrea III to Astrea V have also experienced ratings upgrades by Fitch and/or S&P, which reflect the quality of the Astrea transactions. In addition the Class A-1 bonds of Astrea III have been redeemed on schedule and the Class A-2 bonds have been fully reserved. Please note that each Astrea transaction is a standalone transaction. 

18. If Astrea IV and V bondholders who subscribed at the launch sell the bonds today, are they selling below par? 

Based on today's value (12 March 2021), Astrea V and VI Class A-1 bonds are trading above par on SGX. We cannot predict nor comment on how the Astrea VI bonds will perform post-listing.

19. If there is another stock market crash like what we saw in the 2008/2009 Global Financial Crisis (GFC), and the impact lasts for three years, how will bond performance be affected?

In the section "Hypothetical Lives of the Bonds" in the prospectus, we have a simulation scenario in the issuer model which contemplates a launch in 2008 just prior to the GFC. We also contemplate a case where the GFC is extended for 1 year. In these scenarios the Class A-1 Bonds are redeemed at end of Year 5. Please note that these scenarios are backward-looking and hypothetical in nature.

20. If bought over SGX, will the Bonus payment and Scheduled Call also apply to the buyer?

Yes.

21. Will there be daily trading of bonds? Can Astrea VI be traded on SGX just like other stocks?

Yes. The bonds will be tradable on the SGX-ST during market hours, subject to availability.

22. After I have bought the bond and it is listed, how can I sell it? Can I sell my bond back after 1 year period?

The Class A-1 Bonds will list and start trading on the SGX on 19th March 2021. You may sell the Class A-1 Bonds on the SGX at the prevailing market price.

Portfolio

23. How do you think the ongoing COVID-19 pandemic will impact the performance of Astrea VI bonds? How much worse is the impact of COVID-19 compared to past crises, such as the Global Financial Crisis, SARS, etc.? Can you quantify the impact?

The Astrea VI portfolio construction emphasises quality of the fund managers, and diversification across funds, GPs, vintages and regions, which helps to mitigate downside risks. 

As can be seen in the Hypothetical Model and Independent Consultant Report simulations, the Astrea VI Class A-1 bonds withstand varying extents of economic downside scenarios with no defaults. These scenarios include those that mimic the effects of a pandemic shock, as well the Global Financial Crisis, which were the two most severe economic crisis in the last 2 decades. Please note that these scenarios are backward-looking and hypothetical in nature.

We have included financial statements in the Astrea VI prospectus, which shows the transaction portfolio as of March 2020 and November 2020. The portfolio was affected by a fall in asset value during the initial phase of the COVID-19 pandemic outbreak in the first quarter of 2020. The asset value has since recovered and made gains for the eight months ended 30 November 2020 with net cash distributions received from the Transaction Portfolio in excess of US$140 million. 

As the COVID-19 pandemic is ongoing and its ultimate impact uncertain, the risks of possible adverse impact to the Transaction Portfolio remain. 

(For information only, in June 2020, Astrea IV and V experienced fair value losses due to the impact of COVID-19. By December 2020, they have recovered to pre-COVID levels. Through the year, both Astrea IV and V portfolios generated sufficient cash flows to fulfil all bond obligations, and their credit facilities were not utilised.) 

24. What is the current exposure (in terms of % of NAV) of the Astrea VI portfolio to the sectors/ industries affected by COVID-19? How does this compare to that of Astrea IV and Astrea V portfolios?

The Astrea VI portfolio is very diversified across more than 800 portfolio companies and has exposure to information technology (28%), healthcare (20%), consumer discretionary (13%), industrials (12%), financials (8%). 

We have stressed tested the Astrea VI portfolio and structure through varying extent of economic downside simulation scenarios, as can be seen in the “Hypothetical Lives of the Bonds" section of the prospectus. Similarly, the independent consultant, Bella Research Group, also stress tested the portfolio and structure. In the results, there was no default of the Class A-1 Bonds. Please note that these scenarios are backward-looking and hypothetical in nature.

The Astrea IV and V portfolios are separate and independent but are similarly highly diversified.

25. The Astrea VI portfolio has a 61% exposure to the US. US is in a way unstable, given the conflict with China, to the extent that China is strengthening its military. Should something happen, are bondholders affected?

All investments, including the Astrea VI Bonds, are subject to market and geopolitical risks. 

U.S. has the most developed PE market in the world with deep track record.  

Our emphasis in the selection of funds is on quality fund managers to deliver returns.  

The Astrea VI portfolio construction emphasises diversification across funds, GPs, vintages and regions. This mitigates downside risks.

26. Why is the allocation to Asia only 16%, with it being a high growth market?

U.S. has the most developed PE market in the world with deep track record. The Astrea VI portfolio also has exposure to PE funds in Europe and Asia, and these add diversification. 

Our emphasis in the selection of funds is on quality fund managers to deliver returns.  

The Astrea VI portfolio construction emphasises diversification across funds, GPs, vintages and regions. This mitigates downside risks.

27. Do the bonds invest directly in private equity companies? What are the businesses of these private equities? 

The bonds are issued by Astrea VI Pte. Ltd., which has underlying investments in these 35 private equity funds.

These funds invest in 802 underlying companies across many sectors, ranging from information technology, healthcare, consumer discretionary, industrials and financials.

28. Does each individual PE fund invest in many (or several) private companies (and not only one company)?

Yes, an individual PE fund typically invests in many underlying portfolio companies.

29. What is your ESG policy?

As an investor, we embrace sustainability and have embedded ESG policies in our investment framework. This applies when we make our fund investments.

Almost all GPs in the Astrea VI portfolio have implemented formal ESG policies which they apply in their investment process.

30. How are the investee companies for Astrea VI different from Astrea V? Are there any overlaps of underlying PE funds between Astrea IV, V and VI?

Both portfolios are diversified across various investment sectors and comprise more than 800 investee companies at launch.

Product Development

31. When will other Classes of the PE Bonds be offered to retail investors? And will there be a product ever, where the Equity portion of the PE Secondary FoF is offered to Retail Investors – if yes, when will this be?  

Our aim has always been to make private equity more accessible to a wider base of investors through a phased approach, starting with the Astrea PE bonds. 

An equity product carries a different risk profile. A private equity-based equity product is illiquid and current regulations restrict the distribution of illiquid investment instruments to retail investors. 

The launch of new products will depend on a variety of factors, including investors’ understanding of the product and market conditions. 

We will evaluate market interest and readiness, as well as investor understanding of the product and PE asset class, before we launch an equity product.

32. Will you put future applications under SPAC structure on SGX?

Azalea's mandate is to broaden investor access to private equity. As such we are continually innovating to develop products to bring private equity to investor groups who would not otherwise be able to access the asset class

33. Barring unforeseen circumstances, would it be fair to assume that there will an Astrea issue every year?

Azalea aims to be a regular issuer and the launch of Astrea transactions is dependent on market conditions.

Application, Subscription & Custody

34. After allocation, will the Astrea VI Class A-1 Bonds be kept under CDP? 

Yes,

35. Will investors be able to apply for bonds/securities if they have CDP securities accounts but no trading accounts with broking firms?

Yes.

36. Would DBS/UOB/OCBC issue any statement if the Bonds were purchased from ATM? 

For applications through the ATMs through DBS or any of the Participating Bank, the applicant will receive an ATM transaction slip upon the completion of the application at the ATMs. The ATM transaction slip is for the applicant’s own retention. No report or letter will be sent to the applicant. 

For allocation results, please check your CDP account online or wait for your CDP account statement to be mailed regarding the ESA application results after the IPO closes.

37. Is interest received during the bond's tenor subject to income tax?

No, the interest payments are not subject to income tax, in the manner described in the “Taxation” section of the prospectus. Please note that such information is not intended or regarded to be tax advice.

38. If we have no trading account, can we still buy the bonds?

No, you will need to have a direct Securities Account with Central Depository (CDP) before you can submit an application.

39. Is it possible to apply for the bond from a joint account?

If you are referring to a joint bank account, that is possible. 

However, you may not make your application using joint CDP accounts.

40. Is there any limit to the amount I can subscribe?

There is no upper limit to the amounts you may subscribe for during this Offer Period.

41. Can I subscribe to a minimum sum of $2,000 & buy more bonds subsequently between the 2nd to 10th year? 

You may submit a minimum application for S$2,000 of bonds. However, subsequent purchases will have to be bought on the secondary market at the prevailing market price, in denominations of S$1,000.

Allocation

42. For Astrea V IPO, investors who applied for S$49,000 or less were guaranteed to receive something. Can we expect similar allocation policy for Astrea VI, assuming the demand profile is similar?

We have given this example (see italics below) in the gatefold of the prospectus, but final allocation depends on total valid applications that we receive.  

We reserve the right to change the allocation plan.  

Our intent has always been consistent, i.e. to allocate a significant portion of the IPO to smaller investors and we have achieved this for Astrea IV and V.

Depending on demand, Astrea VI plans to allocate valid applications as follows: 

a) all applications of less than S$50,000 will be allocated in full or in part; 

b) applications of S$50,000 or more will be balloted, with successful applicants allocated in full or in part. 

Astrea VI reserves the right to change its allocation plan.