A roughly $500 million bid wanted in competition, or BWIC, made up of first lien data center loans is being offered to leveraged finance investors, days after the U.S. midterm elections left participants anticipating a slowdown in the AI infrastructure buildout, according to sources.
The secondary sale hit the market today and spans a dozen borrowers, with bids due on Nov. 19, at 2 p.m. ET, the sources said. The package includes $175 million in loans tied to Blackstone-backed QTS, $100 million tied to Vantage Data Centers, $50 million tied to Edged Compute and $25 million tied to CyrusOne, among others, according to the sources.
One of the QTS projects financed through the loans was Project Wave, a $5.38 billion asset-backed green financing deal slated to fund the company’s data center buildout in Wisconsin. QTS is among the numerous data center developers whose projects are facing structural pressures and delays.
This week’s midterm elections brought growing opposition to data center development into sharper focus, as concerns over electricity costs, grid reliability and water consumption continue to gain traction. With data center restrictions on the ballot in 40 states and Democratic wins in states including Texas, much of planned data center capacity could be at risk from moratoriums, tighter regulations and reduced tax incentives.
Among the data center debt offered in today’s package is $25 million in loans tied to Oracle’s Project Jupiter, a massive data center in New Mexico that was financed by an $18 billion privately syndicated loan last year.
Oracle’s force majeure notice at Project Jupiter in September sparked concern from investors over risks in deal documentation associated with delays, Octus previously reported. The project faced additional delays this week over a permit for its on-site power plant.
The political backlash against data centers is raising new questions for investors, who are increasingly limiting their exposure to AI infrastructure financings. Projects that still need permits and grid connections could take longer to build while borrowers keep paying interest.
In addition to Project Jupiter, several of the data center projects tied to the BWIC debt have been hit in recent weeks by regulatory delays, lawsuits and local pushback. Vantage’s data center in Wisconsin, in partnership with Oracle and OpenAI, was caught up in a lawsuit earlier this year filed by environmental activists. Roughly $25 million of debt tied to the Vantage project is being offered in the package.
One investor pointed to tech stocks falling more than 5% in a single session, driven largely by data center concerns. Investors have already grown wary of companies spending billions of dollars on data centers with unclear timing on meaningful cash flow, he said. That caution is starting to reach the high-yield bond market too, as worries about how much more capital these issuers need and whether they can deliver on expansion plans change how comfortable people are holding the credit.
How exposed a data center deal is to the election, the investor said, depends on where the project stands. For example, a facility already under construction, with power secured and a major hyperscaler committed to the capacity, is in a much better position. A new development that still needs permits, grid connections and more capital, however, is a harder sell.
A second investor also described a selective approach, noting that much of the data center buildout went up with little regulation, and the current pushback is forcing a middle ground. What people are looking for is long-term contracts on actual data centers, such as the QTS stack, he said. GPU compute deals are harder to underwrite because of heavy reliance on a single partner and tail risk as contracts unwind.
The various political restrictions that could come in the coming months will not have the same impact on each debtholder, one banker said this week. Even with a higher risk of moratoriums for earlier-stage projects post-election, many leases have provisions around regulatory delays to protect the investors on a loan or bond.
Several borrowers whose debt is being offered in the BWIC have been active in the primary market recently. CyrusOne tapped the leveraged loan market in July with a $1 billion first lien term loan at SOFR+400 bps via Goldman Sachs.
Goldman Sachs also gauged investor interest this summer for a potential $5.4 billion debt offering to fund a Microsoft-backed QTS data center.
Meanwhile, Vantage Data Centers was in discussions with institutional investors including Pimco and PGIM back in September to raise up to $2 billion in loans to fund operations in multiple data center campuses in Virginia and Nevada.
CyrusOne declined to comment. QTS, Oracle, Vantage Data Centers and Edged did not return requests for comment.
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