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Astrea V Class A1 Bonds 3.85% p.a.
18-06-2019, 09:13 AM.
Post: #11
RE: Astrea V Class A1 Bonds 3.85% p.a.
Come on... 4% yield on this kind of risky structured products? I think many people forgot the 6% Pref share default by Hyflux

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18-06-2019, 04:52 PM.
Post: #12
RE: Astrea V Class A1 Bonds 3.85% p.a.
retired1again Wrote:ASTREA IV is currently trading at between S$1.065 and S$1.070 today which yields 4.06% to 4.08%.

Shorter maturity period with a higher yield than that of ASTREA V.

ASTREA IV has another 4 years to next call date. First year interest has already been paid out. Yield should work out to about 2.85% if purchased at $1.06 not taking into account brokerage costs.

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18-06-2019, 05:17 PM.
Post: #13
RE: Astrea V Class A1 Bonds 3.85% p.a.
(18-06-2019, 04:52 PM)ricklim1 Wrote:
retired1again Wrote:ASTREA IV is currently trading at between S$1.065 and S$1.070 today which yields 4.06% to 4.08%.

Shorter maturity period with a higher yield than that of ASTREA V.

ASTREA IV has another 4 years to next call date. First year interest has already been paid out. Yield should work out to about 2.85% if purchased at $1.06 not taking into account brokerage costs.

ricklim1,

Forgot to consider the difference between the purchase price and the bond principal.

Thanks for correcting.

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19-06-2019, 06:50 PM.
Post: #14
RE: Astrea V Class A1 Bonds 3.85% p.a.
Astrea V Class A-1 Bonds Widening Retail Investor Base with  28,358 Successful Applicants

Highlights :
* Retail offer of S$180 million Class A-1 Bonds 4.5 times subscribed
* Nearly S$820 million received from 30,816 valid applicants
* 75% of bonds allocated to all valid applications of less than S$50,000
* Each valid applicant of less than S$50,000 received some allocation
* Applicants who applied for S$50,000 or more were balloted
* Successful balloted applications were allocated in part
* Overall issuance of Astrea V Private Equity (“PE”) Bonds 6.7 times subscribed
* Total subscription of US$4.0 billion1 across all three classes of bonds
* Bonds expected to start trading on SGX-ST at 9:00am on 21 June 2019

More details in https://links.sgx.com/FileOpen/Astrea%20...eID=564003
=========== Signature ===========
Specuvestor: Asset - Business - Structure.

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20-06-2019, 09:09 AM. (This post was last modified: 20-06-2019, 09:10 AM by tanjm.)
Post: #15
RE: Astrea V Class A1 Bonds 3.85% p.a.
(18-06-2019, 04:52 PM)ricklim1 Wrote:
retired1again Wrote:ASTREA IV is currently trading at between S$1.065 and S$1.070 today which yields 4.06% to 4.08%.

Shorter maturity period with a higher yield than that of ASTREA V.

ASTREA IV has another 4 years to next call date. First year interest has already been paid out. Yield should work out to about 2.85% if purchased at $1.06 not taking into account brokerage costs.

To be a bit more precise. The bond has a call date on 14 June 2023. If not called, the coupon rate steps up to 5.35%. If the bond is not called, I suggest investors should be slightly worried (esp since we don't know the composition of the PE Funds) as the cashflow from the redemption of the underlying PE funds has not been to forecast (1.1 billion PE funds to 242 million bond) since that cashflow is used to fund the redemption payment.

The yield to call date of 14 June 2023 is 2.53% at a price of 1.07 as of yesterday. The yield to maturity on 14 June 2028 is actually 3.97%. The step up of coupon rate may not be helpful to the credit rating since it puts more pressure on the PE fund cashflow (though the A-1 tranche does get a first call on the funds).

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20-06-2019, 10:43 AM.
Post: #16
RE: Astrea V Class A1 Bonds 3.85% p.a.
The step up coupon of 5.35% vs yield to call of 2.53%. more than double... If rates stay at what it is, Azalea is bound to call.

This makes me wonder how Astrea V yield will move tomorrow once it starts trading, If it compresses down to similar levels of yield as per Astrea IV, it will have quite a bit of capital gains on day 1.

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21-06-2019, 10:34 AM. (This post was last modified: 21-06-2019, 10:56 AM by tanjm.)
Post: #17
RE: Astrea V Class A1 Bonds 3.85% p.a.
(20-06-2019, 10:43 AM)kikababoo Wrote: The step up coupon of 5.35% vs yield to call of 2.53%. more than double... If rates stay at what it is, Azalea is bound to call.

This makes me wonder how Astrea V yield will move tomorrow once it starts trading, If it compresses down to similar levels of yield as per Astrea IV, it will have quite a bit of capital gains on day 1.

comparing the coupon to yield to call is irrelevant.

Yield to call is the return to investors at current market prices, not at par. Any redemption is at par.

If this were a normal bond, then you'd compare the coupon rate with alternative financing that the issuer can get. In the ASTREA case, it is not even that - I did not read the bond description in detail, but it looks like some of the cashflow after paying coupon interest, goes into a reserve. When the reserve is enough for redemption at call date, it triggers the call.

EDIT:
I skimmed through the prospectus. The average cashout (holding) period of a PE fund is 5.9 years in 2014 and 4.5 years in 2018. Starting from the GFC, holding periods started to lengthen as companies repaired their balance sheets etc. Then it started to trend down. The 5 year call is consistent with this statistic. Given the LTV for A-1 bonds and the average holding period statistic, I'd say it is very very likely that ASTREA will be called at the 5 year mark barring another major financial crisis.

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21-06-2019, 10:40 AM. (This post was last modified: 21-06-2019, 10:41 AM by tanjm.)
Post: #18
RE: Astrea V Class A1 Bonds 3.85% p.a.
Imagine that someone (a "sponsor") has a bunch of PE investments. PE investments are illiquid. So how does the sponsor realize some of his PE investment to cash? He could do it via something like ASTREA. He gets cash up front from the security sale in return for paying some interest.

Now if you have 2 billion in PE fund investment, and you want to put up 1 billion of that into ASTREA. What would you select? The stronger ones? The weaker ones? Those that you expect will redeem soon? Who oversees this process? What are the checks? Perhaps I should go look at the prospectus if I'm curious 8-)

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21-06-2019, 10:42 AM.
Post: #19
RE: Astrea V Class A1 Bonds 3.85% p.a.
(21-06-2019, 10:34 AM)tanjm Wrote:
(20-06-2019, 10:43 AM)kikababoo Wrote: The step up coupon of 5.35% vs yield to call of 2.53%. more than double... If rates stay at what it is, Azalea is bound to call.

This makes me wonder how Astrea V yield will move tomorrow once it starts trading, If it compresses down to similar levels of yield as per Astrea IV, it will have quite a bit of capital gains on day 1.

comparing the coupon to yield to call is irrelevant.

Yield to call is the return to investors at current market prices, not at par. Any redemption is at par.

If this were a normal bond, then you'd compare the coupon rate with alternative financing that the issuer can get. In the ASTREA case, it is not even that - I did not read the bond description in detail, but it looks like some of the cashflow after paying coupon interest, goes into a reserve. When the reserve is enough for redemption at call date, it triggers the call.

I beg to differ about the yield to call being irrelevant. The yield to call best represent the available refinancing yield on the market. Which is why I suggested that if the yield stayed this low, it implied that Astrea SHOULD be able to refinance as such low rates, and therefore it's in their interest to refi at that rate to redeem Astrea IV at par. YTC is the most feasible figure to approximate what the Issuer will be able to refinance at (under certain assumptions of course).

But yeah, Astrea uses a sinking fund.

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21-06-2019, 04:13 PM. (This post was last modified: 21-06-2019, 04:15 PM by tanjm.)
Post: #20
RE: Astrea V Class A1 Bonds 3.85% p.a.
The yield to call is simply the IRR on the ASTREA bond based on its price to retailers (i.e. what retailers want in return for their money) now. The rate at which any bank might lend to ASTREA at call date will be different and this is only a factor in 2023, not now. 

In any case, I meant you can't compare the coupon rate to the yield to call. Even if this were a normal callable bond (which it isn't), the issuer has a choice between the coupon rate it continues to pay on the bond and what it can refinance with a bank at the time of the redemption in the future. The current yield to call (comparing with the coupon rate) is irrelevant in this decision. 

Peace.

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