AI boom gets more expensive: interest rates on loans for data center construction rise

Meta Platforms is financing construction of a Texas data center through a special-purpose company owned by BlackRock, which will issue bonds on its own behalf. The bonds are expected to carry an interest rate exceeding 7%, about 0.4 percentage points higher than when Meta similarly raised $27 billion for another data center last October. The new project requires $12 billion in funding and will deliver nearly 1 GW of computing power. The higher rate translates into tens of millions of dollars in additional annual costs for Meta. 80% of the new data center's shares will be held by the special-purpose company Sopaipilla, with Meta owning the remaining 20%. The bonds mature in 2028 and are backed by 20-year lease payments from Meta starting in 2028. Meta can renew the lease every four years or cancel with a penalty. If construction costs overrun, Meta may increase the budget by up to 5%. If construction is delayed more than 18 months, Meta can exit without compensation. Anthropic recently raised $35 billion backed by GPUs and Broadcom guarantees, showing that the trend of offloading financial responsibility is not unique to Meta. Sopaipilla's bonds received an A+ rating from S&P, one notch below Meta's AA- credit rating.