Compute Futures Could Pave the Way for Compute Hedging, Says Cahill Gordon’s Kalbaugh

By Seth Brumby

One of the biggest, and hardest to analyze, risks in the burgeoning market for debt tied to AI data centers is determining the future value of the graphics processing units in the data center and the compute power they provide. Gary Kalbaugh, head of Cahill Gordon’s commodities futures and derivatives group, said that he expects that the establishment of futures contracts for compute can help solve the problem and eventually lead to hedging covenants in loan documents.

A good start is having a forwards market up and running, Kalbaugh said. The data here is private but does exist. These are real-time, take-or-pay agreements that an entity has entered into for use at some point in the future, he said. Companies such as Ornn and Silicon Data collect data on these agreements ,and their publication could be key to the evolution of a futures market.

Silicon Data and CME Group announced a plan to launch on Oct. 5 two compute futures, according to a joint press release from Aug. 11. The futures contracts would be based on the aforementioned forward prices, which Silicon Data already collects.

“Compute futures give the market something it’s never had: a public, tradable reference price for the resource every AI system runs on. Silicon Data’s benchmarks make that price real; CME makes it tradable. Together, that turns compute from something enterprises negotiate blindly into a market they can actually plan around,” Carmen Li, CEO of Silicon data, said in the statement.

The futures contracts will represent a month’s worth of rent for the Nvidia H100 and Nvidia Blackwell B200, respectively, and will be based on Silicon Data’s H100 Rental Index Futures and B200 Rental Index Futures, which measure hourly rental GPU costs. The futures contracts are pending regulatory approval.

Compute has to be a commodity in order to have a futures contract, said Kalbaugh, who has little doubt that it will meet this requirement for the same reasons electricity does.

“A commodity need not be tangible,” Kalbaugh said. “But the [Commodity Futures Trading Commision] reads a commodity as any article, good or service traded on a futures market or capable of being traded on one. On that reading, the category is extremely broad,” he continued.

Compute power is a nascent market, however, and a core principle for any futures contract is that it is “not readily susceptible to manipulation,” Kalbaugh said. Thinner sources of reliable data means more exposure to manipulation, but scale fixes that, he said.

“A weighted index drawing on 500 contributors is not easily manipulated,” he highlighted, proposing that data center loan agreements and compute offtake and forward agreements should carve out the ability to report compute prices to increase the amount and diversity of sources. He said that he believes, at the end of the day, that compute will have to evolve because it cannot be based on forward contracts forever.

“With a forward, you are generally locked in to maturity and are taking in counterparty risk, but a cash-settled future or swap does not,” said Kalbaugh, who sketched a not-too-distant future for a possible compute hedge: a monthly structure paying a fixed amount for compute and receiving a floating payment, with the floating leg struck on a 30-day average of an index rather than a single day’s print.
 

Fortna

The Thomas H. Lee-backed warehouse automation company secured a bridge loan to cover debt service as the company is expected to engage its lenders in negotiations about a holistic transaction, including a potential restructuring. Term loan prices have collapsed to 16 cents on the dollar from 36 cents three months ago, according to Solve. The company is working with Paul Weiss as legal advisor and Evercore as financial advisor. A majority lender group is working with Gibson Dunn and Centerview while a minority group of lenders is working with Hogan Lovells Cadwalader. Octus’ coverage of Fortna is HERE.

Optimum Communications

Certain lenders to Optimum Communications have signed nondisclosure statements ahead of negotiations with the company about a potential comprehensive restructuring of its CSC Restricted Group’s $22 billion capital structure. In the second quarter, the company’s revenue fell 5.8% year over year to $2.024 billion while adjusted EBITDA dropped 2.25% to $785.7 million. Earlier, the company formed a new unrestricted subsidiary called CSC Investments II to hold its Optimum East cable assets and its Lightpath stake, raising $300 million in preferred equity and issuing $200 million of preferred units in exchange for Optimum common stock at $2.50 held by a Patrick Drahi-controlled entity. Octus’ coverage of Optimum Communications is HERE.

US LBM

The building products distributor disclosed second-quarter 2026 earnings this week, reporting that adjusted EBITDA dropped 37.1% year over year to $105 million on a 9.1% revenue decline. The Bain Capital and Platinum Equity-backed company ended the quarter with $23.9 million of cash and $355 million drawn on its ABL. US LBM continues to wrestle with soft market conditions but expects a more favorable year-over-year comparison in the back half of 2026, especially in the fourth quarter. Octus’ coverage of US LBM is HERE.

United FP

The Planet Fitness franchisee handed control to its first lien lenders in a debt-for-equity swap, with second lien lenders also receiving equity. The move at the largest franchisee in the Planet Fitness enterprise, which is backed by American Securities, follows forbearance agreements that it entered into on May 6 after missing debt service payments due April 30. Octus’ coverage of United FP is HERE.

Cubic Corp.

Cubic Corp is working with AlixPartners as financial advisor as the military simulation technology provider is considering selling certain assets and evaluating options to do so, potentially through the chapter 11 process or on an out-of-court basis. Lenders represented by Davis Polk as legal advisor are also working with Centerview Partners as investment banker. Octus’ coverage of Cubic Corp is HERE.

BFG Supply

The Pamplona Capital-owned horticultural distributor is working with Cassels as Canadian counsel ahead of an expected Part IV recognition of a potential chapter 11 filing. We had previously reported that the company was working with Goodwin Procter and Reflect Advisors on chapter 11 filing preparation and a related sales process. The company is said to be laying off employees and declining new orders amid severe financial difficulties. Octus’ coverage of BFG Supply is HERE.

LoanDepot

The residential mortgage finance originator is working with Kirkland & Ellis to evaluate options for its bond maturities in 2027 and 2028. The company has $340.6 million 8.75% secured notes due November 2027 and $499.4 million of 6.125% unsecured notes due April 2028. During the second quarter, the company repurchased $16 million of notes at an average price of 90 cents with an additional $27 million purchased at 86 cents in July, as elevated rates continue to squeeze margins and origination volume. Octus’ coverage of loanDepot is HERE.

Telesat Corp.

The Canadian satellite communications company is working with Alvarez & Marsal on restructuring options as the company raised $120 million from Telesat GEO, a nonguarantor subsidiary. The company faces over $1.7 billion in debt maturing in December and disclosed during its earnings call this week that it is working on clearing its C-band spectrum and is confident that it will secure an additional $189 million in proceeds under incentive payments from the U.S. Federal Communications Commission. Octus’ coverage of Telesat is HERE.
 

777 Partners

777 Partners, a Houston-based diversified investment holding company, and several affiliates filed chapter 11 in the Northern District of Texas on Aug. 9. Through chapter 11, the debtors seek to continue an out-of-court wind-down, establish an orderly process to resolve disputed claims and transfer longer-duration assets and litigation claims to a liquidating trust.

On Aug. 11, debtor 777 Partners argued to transfer the venue of an involuntary chapter 7 against it to the Texas bankruptcy court on account of the chapter 11 filings. The Florida bankruptcy court, where the involuntary filed, took the matter under advisement without specifying when a ruling could be expected while declining to stay the chapter 11 cases. The involuntary liquidation was filed on July 16 by petitioning creditors Vida Longevity Fund, Vida Insurance Credit Opportunity Fund II and Vida Insurance Credit Opportunity Fund III, who were later joined by JPC Phase 2 LLC.

Later the same day at the chapter 11 first day hearing, Judge Edward L. Morris directed the debtors to look for alternative DIP proposals and negotiate the proposed $24.9 million DIP facility from prepetition lenders including Advantage Capital, or A-Cap. The DIP – consisting of $6.2 million new money and an $18.7 million rollup – faces multiple objections from the Vida creditors and other prepetition lenders-litigation counterparties Leadenhall Capital and ING Capital on account of the DIP’s broad releases, 3:1 rollup, proposed liens on unencumbered assets, including avoidance actions, and limited 30-day challenge period and $25,000 investigation budget.

At a continued interim DIP hearing on Aug. 13, the debtors announced they received an alternative DIP term sheet that “appears to be competitive.” The debtors did not disclose any terms, but said they would file a comparison of the DIP options by Tuesday, Aug. 18. The interim DIP hearing is set to resume on Wednesday, Aug. 19. Octus’ 777 Partners coverage is HERE.

Trinseo

Today is the third day of trial on confirmation of the Trinseo debtors’ prepackaged plan and the CastleKnight-led minority OpCo lender group’s challenges to the intercompany claims created by the company’s 2023 double-dip and 2025 refinancing transactions. Judge Christopher M. Lopez is hearing additional testimony, and closing arguments are set for next week, on Wednesday, Aug. 19.

Based on an RSA with Super HoldCo 1L lenders Apollo, Oaktree and TPG Angelo Gordon and 57% of OpCo lenders, the plan would transfer the bulk of the reorganized debtors’ enterprise value – between approximately $1.45 billion and $1.95 million, with midpoint of $1.7 billion, according to the debtors’ investment banker – to the Super HoldCo lenders while eliminating $2 billion of prepetition funded debt. The plan contemplates a $450 million equity rights offering backstopped by the RSA lenders and incorporates a settlement of claims related to the intercompany loan that underpins the plan’s allocation of value.

Super HoldCo and OpCo lenders would receive 100% of the reorganized company’s equity (subject to dilution and a 10% management incentive plan), 2029 noteholders would receive no recovery and existing equity interests would be canceled. General unsecured creditors would be unimpaired.

According to the minority OpCo lenders, the plan is the “culmination” of the senior secured creditors’ carefully engineered “loan-to-own campaign.” The challenged transactions improperly handed control over the restructuring from the OpCo lenders in favor of the Super HoldCo lenders, they argue. The plan is also opposed by an ad hoc group of minority second lien 2029 noteholders and the U.S. Trustee. Octus’ Trinseo coverage is HERE.

First Brands

Judge Lopez finished the multi-day trial on the First Brands debtors’ reformulated joint liquidating plan at the end of last week by hearing closing arguments, taking the matter under advisement. The judge told the parties that he would “get right to work” on a likely oral but “really detailed” ruling.

Special purpose vehicle lenders, factoring parties, the U.S. Trustee and the chapter 7 trustee for the converted SPV debtors oppose confirmation on account of the plan’s reliance on speculative litigation recoveries to pay administrative creditors and “delayed” effective-date mechanism. The objecting parties also challenge the DIP lenders’ credit bid for avoidance actions and the debtors’ proposed substantive consolidation that they say would tactically favor some creditors for distribution purposes.

According to the debtors, the plan – incorporating a global settlement with the ad hoc group of prepetition/DIP lenders and official committee of unsecured creditors – represents a superior alternative to a chapter 7 liquidation by providing the best and potentially only opportunity for administrative, priority and general unsecured creditors to receive recoveries. Octus’ First Brands coverage is HERE.

West Marine

On Aug. 11, Judge Karen B. Owens confirmed the West Marine debtors’ chapter 11 plan of reorganization on a consensual basis. The plan, premised on a recapitalization transaction, would hand term loan claimants substantially all of the reorganized company’s equity.

The marine aftermarket products provider filed chapter 11 on May 17 to run a market-check sale process on the recapitalization, which did not result in any qualified bids. The plan incorporates a settlement with the official committee of unsecured creditors.

Under the plan, term loan lenders would receive 100% of reorganized equity subject to dilution by a management incentive plan; ABL and first-in last-out, or FILO, claims would satisfied through cash or a dollar-for-dollar conversion into exit financing; and general unsecured creditors would share in a GUC trust funded with $2 million cash, subject to adjustment for excess committee professional fees beyond $2.85 million, and up to $650,000 in additional proceeds from certain recoveries. Octus’ West Marine coverage is HERE.

Edison Wildfire Inverse Condemnation Ruling

Los Angeles Superior Court Judge Laura Seigle denied subrogating insurers’ motion for summary adjudication finding Edison International and subsidiary Southern California Edison liable for inverse condemnation in the 2025 Eaton Fire litigation. As a result, the plaintiffs will have to prove their inverse condemnation claim at trial, with an initial bellwether jury trial set for January 2027. Octus’ coverage of Edison International is HERE.

Fifth Circuit Vacates Surprise Medical Billing Methodology

The entire U.S. Court of Appeals for the Fifth Circuit affirmed a district-court decision vacating federal agencies’ rule on the qualifying payment amount, or QPA, methodology in the federal No Surprises Act. The QPA calculation is an important element of the independent dispute resolution process under the act. Following the ruling, the U.S. Department of Health and Human Services said that the dispute resolution process for out-of-network medical bills remains operational and that it plans to issue new guidance. Octus’ coverage of Surprise Medical Billing Regulations is HERE.

Trade Court Upholds Trump’s Rescission of De Minimis Tariff Loophole

U.S. Court of International Trade upheld the legality of President Donald Trump’s use of the International Emergency Economic Powers Act, or IEEPA, to rescind the “de minimis exemption,” which allows goods valued at less than $800 to be exempt from tariffs. The court finds that IEEPA authorizes the president to nullify an exemption to tariffs even though the U.S. Supreme Court found earlier this year that the 1977 law does not empower the president to impose new tariffs. Octus’ coverage of Tariff Policy is HERE.