Wednesday, 13 June 2018

Astrea IV 4.35% 10 year structured finance bonds

The retail tranche was very small compared to previous retail bonds I applied for (Frasers 3.65%, Perennial 4.65%). 

There was a lot of negativity in HWZ about this bond, but unfortunately, this did not prevent the bond from being oversubscribed by 7.4x. 

  • Astrea class A-1 4.35% : 7.4x oversubscribed.
  • Perennial 4.65% 3 yr: 9.8x oversubscribed.
  • Frasers 3.65%: 3.9x oversubscribed

An "A rated" (i.e. Asf) security with 4.35% coupon is a higher yield than SGD Corporates with comparable 8-9 year maturities. In other words, if we are able to rely on the rating agencies that this is "investment grade", it is better value than existing bonds.

  • Commerzbank SGD 2027 - Bid / Ask YTM - 4.529%/ 4.61% Fitch: BBB
  • NAB SGD 2028 - Bid/ Ask YTM - 3.881% / 4.086% Not rated
  • Lendlease SGD 2027 - Bid/Ask YTM - 3.844%/ 3.919% Fitch: BBB-
  • Landesbank SGD 2027 - Bid/Ask YTM - 3.757%/ 3.85% Fitch: BBB
It is true that this is a complex instrument, but some of the complexity is due to the "safeguards" like the reserve account. But at the end of the day, that is what we rely on rating agencies who can run stress tests on fund flows (S&P's stress test was a 45% haircut to future distributions from the funds and 100% haircut to the private debt fund) to assess risk of default.

There are bloggers who think they can read the prospectus and decide for themselves whether a security is investment grade or not. I do not pretend to have such powers. 

I was only allocated 8,000. The allocation appears to favour the smaller investors which I suppose was the intent behind this issuing the bond.

My Perennial 4.65% is going to mature this year, I wonder what sort of mad rush there will be when they issue their replacement tranche....

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