(Bloomberg) — A data-center developer sold $999 million of junk bonds for a project leased to a SoftBank Group Corp. subsidiary, capping April’s surge of debt issuance to help fund artificial intelligence efforts amid some concerns that such spending won’t pay off.
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SE Cosmos LLC priced five-year notes at a roughly 9% yield, according to a person with direct knowledge of the matter who asked not to be identified as they’re not authorized to speak publicly.
That would mark the highest borrowing cost for a data center-linked junk bond deal so far this year, according to Bloomberg-compiled data. It’s also higher than earlier pricing discussions of low-to-mid 8%, the people said, asking not to be identified because they’re not authorized to speak publicly.
A representative for Morgan Stanley, one of the banks running the deal, declined to comment. Those for SoftBank and Nomura Holdings Inc., which is also involved in the transaction, didn’t respond to requests for comment.
Proceeds are to help develop a 50-megawatt data center in Austin, Texas, that is fully leased to a SoftBank unit under a 15-year contract, the person said. The deal includes sweeteners such as lease rent backstop dates that ensure cash flow starting in December regardless of construction status.
Firms tied to the AI buildout have raised $28 billion from riskier bonds so far this year, much of it this month according to data compiled by Bloomberg, as a number of small firms with lease contracts from hyperscalers ramp up spending to fund infrastructure needed for the AI boom.
But after a $300 billion AI debt binge that spanned every corner of the credit market, investors are starting to show some signs of fatigue even as a record $5.7 billion deal to fund Alphabet Inc.’s Google-linked data centers earlier this month.
On Tuesday, a Nevada data center project tied to Nvidia Corp. sold a $4.59 billion note — albeit at a higher yield than a similar offering in February.
Meta Platforms Inc. on Thursday priced $25 billion of bonds with bigger spreads than a deal with the same-tenored notes in October, after boosting its projected 2026 capital expenditures. Quarterly reports out Wednesday from the four biggest spenders on AI data farms showed that Alphabet Inc.’s Google is seeing a clear payoff from its AI spending while Meta is lagging behind.
