Astrea 7 PE Bonds - Balloting Results

Astrea 7 announced that its bond offering was 3x subscribed.

Class A-1 Bonds

The public offering for the S$280m bonds received S$877m worth of application, meaning that it was 3.1x subscribed. More than 75% of the bonds were allotted to applicants who applied for less than $50,000.

Investors who applied for S$9,000 and below received its full allocation while investors who applied up to S$49,000 received up to S$12,000 bonds. Those who are more adventurous received a 50% chance of getting something more meaningful as shown in the table below.

Class B Bonds

The public offering of US$100m bonds was about 1.26x subscribed. It was unfortunate that the Class B was less well received as investors probably shun the issue not because of the interest rate but more likely due to the forex rate of 1.3866 at which the bonds were fixed.  This likely deterred investors who may be holding on to USD or hold the view that the USD is at record levels. 

For investors who wanted to subscribe but were deterred by the exchange rate, it might make sense to "scoop" up some USD bonds if you have USD that can be used or when the currency weakens. All investors who applied received some allocation, with 73% going to those who applied for less than US$50,000. No balloting was needed for Class B applicants.

Based on the results, my view is that Class A-1 will likely open in the positive territory, while the Class B bonds are likely to open weak, probably slightly below par, given the large issuance.

Having said that, the Class B bonds were very well demanded by institutions and high net worth clients during the placement offering with many under-allotted. Based on the application demand, the Issuer could have allocated more Class B bonds to the placement tranche if it had wanted to.

For investors who have missed out previously, it might make sense to get some bonds through the open market. Imagine you are a private banking client, you can lend up to 50% against investment grade bonds. In this instance you can borrow USD to buy the Class B bonds and still make a levered return as the 6% yield can adequately cover the borrowing cost too. You can potentially juice up the returns to high single digits if you are comfortable with the credit.

Good luck to all those who got something. I am not so lucky and got nothing from the Class A-1 public offering. I will, however, buy Class B from the open market using the USD I have if it drops below par.