Meta pays more to borrow $12bn for a new Texas data center

In short: Meta is backing a $12bn bond deal for a large data center project, but investors are asking for higher interest than they did nine months ago.

What happened

Meta, the company behind Facebook and Instagram, is linked to a new financing plan for a data center project in El Paso, Texas. A data center is a large building full of computers that run online services, a bit like a power station but for internet apps.

The project is expected to raise money by selling bonds through a special-purpose vehicle, which is a separate legal company set up just for one project (like putting one construction project in its own folder). The vehicle is owned by BlackRock and early talks suggest investors want yields of more than 7%.

That is higher than what investors accepted for a similar Meta-linked data center bond deal last year. Some investors are asking for about 0.4 percentage points more, according to people familiar with the discussions. Even small rate changes matter when a company is selling many billions of dollars of bonds, because it can add up to tens of millions in extra interest costs each year.

The new vehicle is named “Sopaipilla Investor” and it will own 80% of the Texas project. Meta will own the other 20%. The bond is tied to Meta’s rent payments on a 20-year lease that starts in 2028, with fees meant to protect lenders if Meta leaves early.

Why it matters

This is another sign that investors are getting more cautious about how much money big tech companies are borrowing to build AI-related infrastructure. Higher borrowing costs can make these projects more expensive, which may affect how quickly new data centers get built and, over time, how much AI capacity companies can add.

Source: Financial Times