A data centre developer sponsored by Blue Owl Capital affiliates raised $1.1 billion in junk bonds for a CoreWeave-linked project on 23 September, at a yield roughly 2.7 percentage points above similarly rated debt, Bloomberg reported.
Key points
- The five-year notes priced at 98.5 cents on the dollar to yield 9.25%.
- The Digital Drive campus near Richmond is planned to provide 76 megawatts of IT capacity, all leased to CoreWeave under a 15-year, $2.94 billion contract.
- S&P Global Ratings assigned the bonds a BB- rating and identified reliance on one speculative-grade tenant as the principal risk.
Five-year notes yield 9.25%
Bloomberg attributed the five-year notes’ 9.25% yield and sale price of 98.5 cents on the dollar to an unnamed individual with knowledge of the deal. The yield was roughly 2.7 percentage points above the average for debt with similar ratings tracked by the publication. That comparison is with rated bonds, rather than with another data centre financing.
Before the sale, discussions with investors pointed to a yield in the low- to mid-9% range, although the terms could still change, Bloomberg reported on 22 September. Banks led by Goldman Sachs Group had begun marketing a roughly $1.1 billion bond issue to pay for construction of the CoreWeave-leased project.
Goldman Sachs, Citigroup and Deutsche Bank led the completed sale, Briefs reported. The financing places the construction borrowing in the junk-bond market, while the planned campus is leased to a tenant that S&P classifies as speculative grade. The quoted yield is the return offered to buyers of the notes at their sale price.
AI infrastructure borrowers have been bringing more deals to the junk-bond market, with investors demanding higher yields to finance construction, particularly when projects lack investment-grade tenants, Bloomberg reported on 22 September. The Digital Drive transaction followed that pattern with a bond sold below its face value and priced to yield 9.25%.
Digital Drive leases 76 megawatts to CoreWeave
The money is for Digital Drive, a data centre campus near Richmond, Virginia. Affiliates of Blue Owl Capital, Cedarwood Investment Group and PowerHouse Data Centers sponsor the project, according to a deal prospectus described by Bloomberg. The proposed site has 76 megawatts of IT capacity.
CoreWeave has a 15-year contract worth $2.94 billion for all of that capacity, according to the prospectus account. The agreement assigns the entire planned output of the campus to one customer. For the developer, the bond sale raises money for construction against that long-term lease.
The contract figure describes the value of CoreWeave’s lease over its term, while the $1.1 billion bond issue finances the project. Those are separate figures for the customer agreement and the borrowing. The project’s construction and the tenant’s future use of the capacity are therefore central to the financing described in the prospectus.
S&P assigns BB- to the notes
S&P Global Ratings assigned the notes a BB- rating, three steps below investment grade, Briefs reported. The rating applies to the project’s debt. CoreWeave is also the tenant at the centre of the risk assessment cited in the report.
“Exposure to a single, speculative-grade tenant remains the key risk,” S&P said, according to Briefs. The 15-year lease covers all 76 megawatts planned for the campus, concentrating its contracted capacity with CoreWeave. Bond investors are financing construction before the site begins operating.
CoreWeave has also raised capital through its own securities: an AI Affairs report on its convertible bond sale recorded a $4.2 billion offering at 2.875%. The Digital Drive notes are a separate borrowing by the developer of a campus leased to CoreWeave.
The Digital Drive campus is expected to begin operations between 2027 and 2028, according to the project prospectus described by Bloomberg.
