Primary Market Braces for Multibillion-Dollar Data Center Wave in Post-Labor Day Rush

Billions of high-yield debt tied to data centers is expected to hit the primary market as soon as this week, kicking off a post-Labor Day surge of deals financing the ongoing AI buildout.

The flurry of deals, several of them led by Goldman Sachs, would kick off tens of billions of AI infrastructure leveraged debt expected for the rest of this year.

Among the deals expected to launch in the coming days is Applied Digital’s $3.5 billion high-yield bond led by Goldman Sachs to fund data center operations in Louisiana. The financing will support a 15-year lease for the Delta Forge 1 campus with either Meta or Amazon serving as the tenant, Octus reported in August. Early price whispers are coming in in the mid-7%-to-8% range, according to sources.

As several data center-related high-yield bonds have come to market in recent months, investors have become more discerning when evaluating financings, according to a leveraged finance banker. Greater information regarding regulatory, political and geographic risks tied to the data center buildout make it more challenging for issuers to establish price talk and predict how the market will digest each deal, the banker added.

Applied Digital’s financing is just one of several large AI infrastructure bonds that will compete for investors’ attention in the coming weeks. Goldman Sachs is also premarketing a roughly $1.15 billion secured note offering for Digital Drive, a data center campus in Chesterfield, Virginia. The offering is slated to finance the construction of facilities tenanted by CoreWeave, as reported by Octus. Initial price whispers are in the high-8% to 9% range, though sources cautioned this is not official pricing and terms are subject to change.

Meanwhile, Goldman Sachs is also sounding out investors on a $800 million high-yield bond offering to finance the data hall buildout in two Novva Data Center campuses in Nevada, Octus reported last month. The deal is expected to launch soon, according to sources, with unofficial price whispers coming in the high-8% area.

As primary market dealflow returns following the summer slowdown, AI-related debt continues to be a focus for many, given the deal size and the diligence required when evaluating terms, according to one investor.

While much of the anticipated AI-related issuance is in the high-yield bond market, the leveraged loan calendar is also staying active, including Volta Infrastructure Holdings’ $5 billion debt financing, in part to fund graphics processing unit, or GPU, purchases. The JPMorgan-led deal is currently premarketing with early price discussions on the loan component floated around SOFR+500 bps and 98-98.5 OID, amid investor concerns regarding deal terms and the company’s history, Octus previously reported.

The rush of deals in September will kick off the tens of billions of dollars in AI infrastructure debt expected throughout the fall. Additional financings in the pipeline for the rest of the year include Nexus Data Centers’ roughly $15 billion of bridge financing to fund the buildout of an Anthropic-leased data center in Texas. Crusoe is also working with Morgan Stanley on a bond takeout for its $5.5 billion of bridge financing for its data center business, as well as an additional $509 million special purpose vehicle-backed GPU loan, led by Goldman Sachs, with Jane Street as an offtaker.

Some market participants have raised questions about whether the market can absorb this pace of issuance. Still, most agree September’s deals are only the beginning of a massive pipeline of AI infrastructure debt by year-end.

Goldman Sachs did not respond to requests for comment.