Google-linked data centres selling record US$5.7 billion junk bond

[NEW YORK] Data centres linked to Alphabet’s Google are seeking to raise US$5.7 billion from a junk-bond sale, in what would be the largest deal of its kind to finance the artificial intelligence buildout boom.

Morgan Stanley kicked off its marketing on Wednesday (Apr 15), and is expected to price the notes as soon as this week, said a source.

The proceeds will fund the construction of two data centres on a campus in Sullivan County, Indiana, which will be leased to cloud-computer startup Fluidstack and backstopped by Google, the source added.

The rapid expansion of AI has created an unprecedented shortage of data-centre space, graphics-processing unit chips and quick access to electricity to power it all. To fund all of that, companies are tapping every corner of the debt markets from junk bonds to project finance.

At US$5.7 billion, the deal marks the largest US dollar junk bond to test investor demand for data-centre debt, and the biggest to be led by one Wall Street institution – Morgan Stanley – based on Bloomberg-compiled data.

The new deal would mean that the bank beats its own prior record. It had a sole-led high-yield bond offering for cryptocurrency miner TeraWulf, which was a deal that was also backstopped by Google.

A representative for Morgan Stanley declined to comment, while those for Google and Fluidstack did not respond to requests for comment.

A joint venture (JV) owned by Next Frontier and Fluidstack is selling the new five-year notes. The bonds will be issued by Meridian Arc HoldCo, as the JV is formally known, the source said. 

Fluidstack helps develop data centres through building and operating high-performance computing infrastructure, an area of business that is booming amid the rise of AI.

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The firm recently announced a US$50 billion deal with Anthropic to build custom data centres for the large language model maker. 

In August, Fluidstack chose to expand its use of a TeraWulf-operated data centre in New York.

Around the same time, Google increased its backstop for TeraWulf to US$3.2 billion to support debt financing. The technology giant also boosted its pro forma equity stake in TeraWulf to around 14 per cent. BLOOMBERG