Temasek Unit Raises $510 Million Via Private Equity-Backed Bonds

  • Two categories are listed, in a first for such bonds in nation
  • Deal subscribed more than 8 times, a third sold to individuals

A unit of Singapore state investment company Temasek Holdings raised $510 million via bonds backed by its interests in private equity funds that co-invest with industry powerhouses such as Blackstone Group LP and KKR & Co.

Two categories of the debt totaling $440 million are listed, in a first for such notes in the country, according to a statement from Azalea Asset Management, which is wholly-owned by Temasek. The bonds were issued by Astrea III, a vehicle that holds interests in 34 private equity funds that is sponsored by an Azalea unit.

The offering makes private equity, typically an illiquid investment, more accessible to a wider group of investors, according to the Temasek unit. The deal was subscribed more than eight times, with demand seen from institutional investors, including insurance companies, endowment funds and foundations as well as private banks, according to the statement. About a third of the fund was allocated to individual investors.

“Traditionally, private equity is an asset class only available to a selected group of investors with significant capital to invest over the longer term,” said Margaret Lui, the chief executive officer of Azalea in a statement. “We are actively exploring suitable opportunities for retail investors to participate in private equity-based products in the future.”

The bonds, backed by cash flow from private equity funds, could set a reference point for the pricing of other issues. “Given that this is a very new asset class we want to see how the market performs,” Chue En Yaw, the head of private equity funds at Fullerton Fund Management, said at a briefing in Singapore on Wednesday. “Hopefully we can set some benchmark.”

‘High Profile’

Fitch Ratings said that the deal structure was more common in the U.S., where university endowments have been cutting stakes and allocations to hedge funds. Temasek’s deal could spur more interest from investors and potential issuers, it said.

“This is certainly a very high profile deal,” said Gregory Fayvilevich, a senior director for funds & asset management at Fitch in New York. “Maybe this will spur additional developments in the market. We have gotten a couple of calls from other market participants interested in the type of structure that’s available here.”

The Astrea III bonds, with a 10-year maturity, include S$228 million ($170 million) of Class A-1 notes and $170 million of Class A-2 notes, $100 million of Class B notes and an unrated $70 million of Class C notes. Credit Suisse Group AG and DBS Group Holdings Ltd. arranged the sale. Fullerton Fund Management Co. is the manager of Astrea III.

Before it's here, it's on the Bloomberg Terminal.