(April 25): A US$16 billion ($20.42 billion) financing for a giant Oracle Corp data centre in Michigan has wrapped after months of stop-and-start negotiations with investors.
Bank of America Corp sold US$14 billion of bonds tied to the project, in a debt sale that was anchored by Pacific Investment Management Co, according to a statement by the data centre developer Related Digital.
Pimco bought about US$10 billion of the bonds that priced Friday, while other investors bought the remainder of the debt, according to people with knowledge of the matter, who asked not to be identified because they’re not authorised to speak publicly.
The debt is part of a larger US$16 billion financing package that will fund the data centre in Saline Township in southeastern Michigan. Oracle is the tenant and aims to use the campus to power applications for OpenAI, Bloomberg has reported.
The financing includes equity from Related Digital and funds affiliated with Blackstone Inc. The latter contributed about US$2 billion of the equity, Bloomberg previously reported.
The bonds were sold privately in a 144A offering, meaning they can only be bought by large institutional investors, the people said. The notes, which mature in 2045, were priced at 98.75 cents on the dollar and carry a 7.5% coupon, according to some of the people and Bloomberg-compiled data.
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A representative for Pimco declined to comment on the details of the bond financing, while representatives for Oracle also didn’t immediately comment on financing details. Those for Bank of America and for Wells Fargo & Co and Goldman Sachs Group Inc, who were also involved, didn’t immediately respond to comment requests.
Related Digital, a venture of New York-based property developer Related Cos, said the project will play a critical role in America’s digital future.
Debt logjam
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The protracted process involving the project in Michigan’s Saline Township shows how Big Tech’s debt-fuelled AI splurge is running into more intense scrutiny from Wall Street.
The financing follows other massive debt packages that banks assembled for Oracle data centres: a US$38 billion debt deal to build facilities in Texas and Wisconsin, and US$18 billion for a New Mexico site.
DTE Energy Co is supplying power to the project, while Oracle is financing a new battery storage investment, according to the statement. The Saline Township campus will include three single-storey data centre buildings with more than a gigawatt of capacity. The project is being developed for Oracle as part of its partnership with OpenAI to expand AI compute capacity across the country.
The biggest technology companies are pouring hundreds of billions of dollars into data centres and other infrastructure as they bet artificial intelligence will reshape large parts of the economy. Much of that money is coming from debt markets. Since last year, at least US$290 billion of debt financing has been arranged for hyperscaler projects.
Oracle has become one of the largest high-grade corporate bond issuers in the US, with about US$120 billion of notes in the main US corporate bond index. In early February, it sold US$25 billion of bonds.
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