JPMorgan, Goldman boost yield on Volta AI loan to lure investors

JPMORGAN Chase and Goldman Sachs Group hiked the yield and sweetened terms on a US$5 billion leveraged loan sale for Volta Infrastructure Holdings as investors demand greater compensation to buy risky debt tied to the artificial intelligence boom.

The banks have been marketing the offering for Volta, an AI cloud startup, since last week and sold it on Thursday (Oct 16) at 6.5 percentage points above the benchmark rate and a discounted price of 95 US cents on the dollar, according to people with knowledge of the matter. 

That price point pushed yields up past the 11 per cent that banks had earlier floated, rivaling the highest rates paid so far to finance the AI build-out. 

The deal also offered greater investor protections and included structural changes that would require the borrower to pay a penalty if the debt is repaid early, one of the people said, asking not to be identified because they are not authorised to speak publicly.

A representative for JPMorgan declined to comment, while those for Goldman Sachs and Volta did not respond to requests for comment.

Volta is among a group of AI companies known as neoclouds, which rent access to chips and other AI infrastructure. The company’s deal will be used to finance a data center complex in Norway that will be managed by Volta Infrastructure in partnership with Bitdeer Technologies Group, a Bitcoin miner that operates data centers. 

Anthropic PBC has already signed a six-year agreement for compute capacity at the site, Bloomberg previously reported, citing people familiar with the agreement. 

The loan sale immediately rankled managers of collateralised loan obligations – the biggest buyers of leveraged loans – for a number of reasons. For one, it’s unrated, which makes it harder for CLOs to buy the debt. But on top of that, it’s a large transaction from a debut borrower tapping the market at a volatile time.

Among other changes, the interest rate on the debt will change if Volta gets certain ratings, the person added. 

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The debt is split into two parts: a US$1.3 billion term loan and a US$3.7 billion chip loan. The transaction was initially pitched at spreads in the range of 6.25 to 6.5 percentage points above the benchmark rate and a discounted price of 97 to 98 US cents on the US dollar. 

The US$1.3 billion term loan will be used to make lease payments to Bitdeer to use the data center, Bloomberg previously reported. The US$3.7 billion chip loan will be used to purchase about 36,000 graphics processing units, or GPUs, made by Nvidia.

The deal has faced increased scrutiny amid a tech sell-off that sent AI cloud-computing provider CoreWeave’s junk bonds plunging into distressed territory. Yields on CoreWeave’s debt topped 15 per cent this week, with a measure of credit risk climbing to an all-time high. 

Volta was founded earlier this year by Ricard Boada and Sofia Gumuzio, two former executives from Brookfield Asset Management’s infrastructure business. The company’s goal is to make it easier for top AI labs and smaller startups to pay for Nvidia’s cutting-edge chips. BLOOMBERG