A consortium of banks spearheaded by Morgan Stanley is preparing to shift roughly $15 billion of loan exposure tied to a major Texas data center into the bond market, according to people familiar with the matter. The loans are connected to a Google-backed campus that has been leased to artificial intelligence company Anthropic and is currently under construction in Hubbard, Texas.
The lenders plan to refinance the debt they originally committed to the project by issuing multiple bond tranches once the loans are drawn, the sources said. The financing package is intended to cover obligations related to the 2,000-acre data center campus, which remains in the construction phase.
Key to the bank loan structure is a delay-draw provision that permits Nexus Data Centers, the developer on the project, to take down portions of the debt over time as the campus reaches defined construction milestones. That flexibility is built into the loan agreement and will allow incremental borrowing aligned to progress on the site.
Not all of the committed debt may be sold into the bond market. Some portions could instead be refinanced through the leveraged loan market, giving the arranging banks multiple routes to exit their loan commitments. The $15 billion package is expected to be split across several bond sales rather than issued as a single security.
Despite Google providing backing to the data center project, the bonds are anticipated to receive a speculative-grade rating from credit raters. The expected lower-grade rating reflects that Google’s support would only take effect after the data center is fully built, meaning the rating agencies may not assign investment-grade status during the construction phase.
The lenders' strategy is to transfer construction and takeout risk into the public debt markets once the loans are in place. Sources said refinancing through bond markets could happen as soon as the loans are drawn, though the exact timing will depend on market appetite and the staged withdrawal of funds under the delay-draw facility.
Summary
Banks led by Morgan Stanley are preparing to sell $15 billion of debt tied to a Google-backed data center leased to Anthropic in Hubbard, Texas. The debt will likely be split into multiple bond sales and may include refinancing in the leveraged loan market. A delay-draw loan feature will let Nexus Data Centers withdraw funds as construction milestones are achieved. Creditors expect a speculative-grade bond rating until the data center is completed and Google’s backing becomes effective.
Key points
- The financing covers a 2,000-acre data center campus under construction in Hubbard, Texas, leased to Anthropic.
- The $15 billion debt package is expected to be divided into several bond issuances, with some portions possibly routed to the leveraged loan market.
- The bank loan contains a delay-draw feature allowing Nexus Data Centers to withdraw funds incrementally as construction milestones are met.
Risks and uncertainties
- Credit ratings are expected to be speculative-grade until the data center is fully built and Google’s backing becomes operative, which could affect pricing and investor demand.
- Market appetite for large bond tranches and leveraged loans will determine how quickly and successfully the banks can refinance their commitments.
- The staged nature of the delay-draw facility means timing of debt drawdowns and subsequent bond sales will depend on construction progress.