Temasek unit unveils $1.1bn PE portfolio to back collateralised fund obligation

A subsidiary of Temasek has revealed details of the $1.1 billion private equity portfolio that will underpin its latest collateralised fund obligation, seven months after Secondaries Investor reported the vehicle’s impending launch.

Azalea Asset Management, a wholly owned subsidiary of the S$275 billion ($204 billion; €174 billion) Singaporean state-owned investment company, will use the portfolio, which comprises stakes from 36 different funds, to generate cashflows for holders of the Astrea IV series of bonds, according to a prospectus published on Wednesday.

The Astrea IV bonds, which have a 10-year tenor, will be listed on the SGX-ST Mainboard. The highest class of bond will be offered to Singaporean retail investors, with a minimum subscription amount of S$2,000.

The date of the offering has not yet been decided, according to the prospectus.

Funds managed by Blackstone account for the largest proportion of the portfolio’s net asset value at 10.6 percent. Silver Lake Partners and PAG Asia funds account for 8 percent and 6.9 percent, respectively. The largest single fund position is Blackstone Capital Partners VI, a $16.4 billion 2011-vintage buyout fund, which accounts for 9.2 percent of NAV, the prospectus noted.

Temasek had been acquiring stakes on the secondaries market with the intention of using them in Astrea IV, Secondaries Investor reported in October. These include interests in buyout funds it bought from Canada’s British Columbia Investment Management Corporation.

In a collateralised fund obligation, an equity holder sells a portfolio to a new vehicle with a new manager, and the original owner can select which kinds of notes it wants to hold and extract liquidity by selling the equity to a new buyer.

The original holder can also keep the equity and instead issue debt to buyers through publicly listed bonds, as Temasek did with its previous vehicle, Astrea III, through subsidiary entities.

Astrea IV’s bond offering will comprise S$242 million of class A-1 bonds, $210 million of A-2 and $110 million of class B, running from highest to lowest in terms of credit quality, the prospectus noted.

The interest rate has not yet been fixed.

Predecessor Astrea III was more than eight times oversubscribed and had a net asset value of $1.1 billion as of 31 March, according to its latest annual report.

Read more about securitised portfolios:

• Park Hill on collateralised fund obligations
• The return of CFOs
• A new dawn for securitisations
• Securitisation: opening up private equity

Story altered to reflect that the bonds will be issued by a subsidiary of Temasek and only class A-1 bonds will be issued to retail investors.