Mark Zuckerberg’s tech company, Meta Platforms Inc., has announced that it is finally settling a financial agreement worth around $30 billion for its data center in rural Louisiana. This deal will be the most significant private capital agreement ever recorded in history.
Under this agreement, Meta and Blue Owl Capital Inc. will share ownership of the tech company’s Hyperion data center based in Richland Parish, Louisiana. The tech giant will retain only 20% of the shares for Meta, according to individuals knowledgeable about the situation.
Financial institutions join forces with tech firm amid AI boom era
Meta and Blue Owl Capital Inc.’s deal highlights growing interest in the AI ecosystem as tech companies join forces with financial institutions to make significant investments in the industry.
Morgan Stanley plays a crucial role in this agreement. To illustrate, the bank arranged for approximately $27 billion in loans and around $2.5 billion in investments via a special purpose vehicle to finance the construction. This kind of arrangement is becoming more common for substantial initiatives.
The bank began embracing this deal at the start of the year with a strategic approach to attracting several asset managers and infrastructure lenders who wanted to be part of it. After careful consideration, a reliable source suggested that Pacific Investment Management Co. and Blue Owl emerged as the winners.
This funding approach is established to encourage tech firms with innovative ideas to develop massive data centers, allowing them to continue this initiative without negatively impacting their credit scores. As a result, data from sources has pointed out that many companies are taking significant debts to cover their escalating expenses.
Additionally, it allows tech firms to maintain low debt levels and grants Wall Street investors an opportunity to make investments in physical assets considered safer.
On the other hand, Meta opted for a completely different approach in this financing setup. The tech giant revealed that it is not taking on the debt directly, but the financing institution is doing so. Meta’s role in the deal is to act as the developer, operator, and tenant of the initiative. Notably, this project is scheduled for completion in 2029.
In the meantime, tech companies in the US bond markets managed to raise about $157 billion by late September. This reflects a 70% increase compared to last year.
When reports requested representatives from Meta, Morgan Stanley, Pimco, and Blue Owl to comment for more information on the topic of discussion, they declined to respond.
Elon Musk’s xAI 20 billion fundraising marks a significant deal in the tech industry
Recently, structured investments have gained more interest as insurers and other investors seek debt linked to tangible assets. An example of a company that has adopted this strategy is Elon Musk’s AI company, xAI, in its recent $20 billion fundraising round. In this approach, the company leases chips rather than owning them outright.
As previously reported by Cryptopolitan, the new round is more significant than initially expected. It is tied to xAI’s plan to utilize Nvidia processors for Colossus 2, its largest data center, located in Memphis.
The total package mixes equity and debt. Reports show that approximately $7.5 billion is in equity, while as much as $12.5 billion is in debt. The deal is structured through a special purpose vehicle that purchases Nvidia GPUs and rents them back to xAI for five years, providing financiers a path to recover their investment without exposing themselves to company-level risk.
On October 16, the parties involved in the funding round completed the last step. Under this deal, they intended to price the bonds in a 144A format with Pimco as the primary lender, according to people familiar with the situation, who asked not to be identified because this information is private.
The individuals also highlighted that a few other investors are set to receive some shares of the debt, which matures in 2049 and will be fully repaid over time.
Another source stated that the bonds are likely to price at approximately 225 basis points over Treasuries. Morgan Stanley was the sole bookrunner on this deal, the sources said.
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