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5 reasons on why I decided not to invest in Astrea IV bonds

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It seems like yesterday when more than 10,000 retail investors in Singapore lost more than $500 million during the Lehman Brothers Minibond saga. That was in 2008. Fast forward to 2016, many accredited investors lost at least $250,000 after investing in Swiber junk bonds. And then in May 2018, Hyflux stunned the market by halting the trading of its $500 million perpetual bonds and the payment for the coupon payments. Given the spate of bond tragedies suffered by investors in recent years, one must be wondering if “this time it is different” for Astrea IV bonds.

For sure, it would not be fair to compare Astrea IV bonds to Minibonds, Swiber Bonds and Hyflux perpetual bonds. Even though they are all basically debt instruments issued by companies to raise capital, Astrea IV bonds are indirectly issued by Temasek Holdings (the Sponsor, Astrea Pte Ltd, is wholly-owned by Temasek Holdings). With such a strong issuer, the possibility of default is extremely improbable, to be frank.

Astrea

Furthermore, the CEO of Temasek Holdings is Madam Ho Ching, the wife of Singapore Prime Minister. For Temasek Holdings to offer such unprecedented innovative product to retail investors, there are surely safeguards designed to ensure that it will not fail. Otherwise, public confidence would be shaken to the core. Probably because of this, only half of the tranche ($121 million), Class A-1 Bonds, are opened to public subscriptions.

In my opinion, it is quite clear that Temasek Holdings is using this exercise to “test water” and possibly to gauge the market demand because for a giant sovereign wealth fund like Temasek Holdings, such small size bond offering is really not worth the hassle.

At 4.35% per annum, the interest rate is certainly very attractive for a premium bond (it is expected to be given A ratings by credit ratings agencies). In all honesty, the thought of investing in Astrea IV bonds did cross my mind and I almost ran to the ATM to apply for the bond. But after much thinking, [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: July 8, 2018 — 4:20 pm

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