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Banks are planning to offload $15bn of debt tied to a Google-backed data centre in Texas that has been leased to Anthropic, as Wall Street lenders grow wary of holding AI infrastructure debt on their balance sheets.
A consortium of banks led by Morgan Stanley is planning to tap the bond market to refinance the debt they committed to the 2,000-acre data centre campus under construction in Hubbard, Texas, as soon as the loans are drawn, according to people familiar with the matter.
The bond market has become an increasingly popular avenue for colossal AI initiatives to raise long-term capital since the market’s depth means that projects can be financed more swiftly and at a lower cost than through bank loans.
For banks, jettisoning the debt also helps reduce their overall AI risk exposure and frees up capacity for more lending.
Meanwhile, the bank-focused market for infrastructure financing, which used to fund projects such as gas pipelines and airports, has been overwhelmed by the huge capital needs from AI build-outs.
Big Wall Street banks have spent months seeking buyers for more than $50bn of construction debt for several data centre projects leased to Oracle earlier this year, and some lenders have sought to manage their exposure through risk-transfer deals.
The $15bn debt package was expected to be split into multiple bond sales, as the bank loan has a so-called delay-draw feature that allows Nexus Data Centers — the project developer — to withdraw the debt over a period of time after hitting certain construction milestones, the people said. Part of the debt could also be refinanced in the leveraged loan market.
The bond is expected to carry a speculative-grade rating even with Google’s backstop, which is only effective after the data centre is fully built. This meant investors would have to shoulder risks including construction delays and cost overruns, the people added.
The data centre will be filled with Google’s custom TPU chips, which will be financed separately.
The new Texas campus will be powered by its own natural gas power plant to avoid delays and surging costs. The large number of data centre projects set to be built in the Lone Star State has led to rising concerns around strained power and water supplies as well as rising utility prices.
Merging data centre and power assets, however, can lead to complex financing since lenders need to underwrite two different kinds of risks simultaneously. Project Walleye, a similar Meta-led data centre with behind-the-metre power, had to offer investors additional yield to compensate for the additional risks.
Google’s financial support for the project was first reported by the FT in March. The Wall Street Journal last week reported on some aspects of the financing.
Nexus and Morgan Stanley declined to comment. Anthropic and Google did not respond to requests for comment.
