Meta, Blue Owl seal US$30 billion private capital deal for AI
Structured investments are becoming more in demand as insurers and other types of investors search for debt tied to assets
[NEW YORK] Mark Zuckerberg’s Meta Platforms is set to seal an almost US$30 billion financing package for its data centre site in rural Louisiana, marking the final step for the largest private capital deal on record.
Blue Owl Capital and Meta will split ownership of the Hyperion data centre site in Richland Parish, Louisiana, with the tech giant retaining just 20 per cent of it, according to sources with knowledge of the matter. To finance the build-out, Morgan Stanley arranged over US$27 billion of debt and about US$2.5 billion of equity into a special purpose vehicle (SPV), a structure for large deals that’s becoming increasingly common.
The bank started to work on the deal earlier this year, with a flurry of asset managers and infrastructure lenders trying to get their foot in. Pacific Investment Management Company ( Pimco) and Blue Owl eventually won out, Bloomberg reported. Pimco is the anchor lender.
Spokespeople for Meta, Morgan Stanley, Pimco and Blue Owl declined to comment.
The financing is set to provide a roadmap for other hyperscalers looking to develop massive data centre sites without harming their credit ratings, as firms go on borrowing binges to try to keep up with the costs. In the US bond markets alone, tech companies raised about US$157 billion to late September, up 70 per cent from that time last year, according to data compiled by Bloomberg.
Under the SPV structure, Meta is not borrowing the capital itself, the financing entity is. Meta, in turn, will be the developer, operator and tenant of the project, which is scheduled to be completed in 2029, the sources said. Through its 20 per cent stake in the project, it will provide almost US$6 billion of construction funding, according to a ratings report.
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The SPV structure helps tech companies avoid placing large amounts of debt on their balance sheets and gives Wall Street investors the option to put money against physical assets, making them investment-grade. Structured investments are becoming more in demand as insurers and other types of investors search for debt tied to assets.
Elon Musk’s artificial intelligence (AI) startup xAI is pursuing a similar structure for its latest US$20 billion fundraise, in which the firm just rents the chips from a financing vehicle instead of fully owning them.
On Oct 16, the parties in the Meta deal took the final step: they priced the bonds in the 144A format, said the sources who declined to be identified, as the details are private.
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A handful of other investors received some allocations of the debt, which matures in 2049 and is fully amortising, two of the sources said. The bonds are priced at about 225 basis points over Treasuries, one of the sources added. Morgan Stanley was the sole bookrunner on the transaction, the sources said. S&P Ratings gave the securities an investment grade rating of A+, according to a report.
By Friday morning, the bonds were being offered at 105 cents on the US dollar, a separate source said, a rare jump for lightly syndicated investment-grade bonds. In a matter of hours, at least US$1 billion of bonds exchanged hands well above par, one of the sources said.
For Pimco, the deal is an important win, as it has been striving to diversify beyond its background in publicly traded debt. Earlier this year, the credit giant also made a push into asset-based finance by purchasing, alongside KKR, a nearly 10 per cent stake in Harley-Davidson’s financing unit and buying up its retail loans, Bloomberg reported.
Hyperion, a four-million-square-foot complex in rural Louisiana, is the largest of Meta’s 29 data centres around the world. It is expected to eventually be able to draw, at full capacity, as much as five gigawatts of power, roughly the equivalent of four million US homes, according to a Bloomberg analysis of government data. Entergy is set to provide up to three GW of power for Meta’s campus by December 2028, S&P’s ratings report said, as long as it can complete a substation, several transmission lines and power generation plants.
Morgan Stanley, which advised Meta on the deal, is making a splash in the AI space. The bank also advised xAI in their corporate debt raise in June and is currently marketing junk bonds for TeraWulf, a cryptocurrency mining company. Morgan Stanley also worked on the US$40 billion purchase of Aligned Data Centers by investors led by BlackRock’s Global Infrastructure, Bloomberg reported.
The Louisiana site is just one of a series of large data centres that Meta is building. The company announced another gigawatt-sized complex earlier this week in El Paso, Texas, and is also building a large centre in Ohio. BLOOMBERG
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