Banks lend $18 billion for Oracle-tied data center in New Mexico

(Bloomberg) — A group of about 20 banks is providing a roughly $18 billion project finance loan to help fund the construction of a data center campus tied to Oracle Corp. (ORCL), marking the latest mega debt deal to help bankroll the artificial intelligence boom.

Sumitomo Mitsui Banking Corp, BNP Paribas SA (BNP.VI), Goldman Sachs Group Inc. (GS) and Mitsubishi UFJ Financial Group (MUFG)are administrative agents on the deal, according to people with knowledge of the matter, who asked not to be named discussing a private transaction. The quartet has brought other banks into the fold, and will now sell the debt to additional banks and institutional investors in what’s called a retail syndication, with commitments due in late November, the people added.

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The data center campus in Doña Ana County, New Mexico is part of the Stargate project, which is being spearheaded by OpenAI, SoftBank Group Corp., and Oracle to rapidly invest $500 billion to build AI infrastructure across the US. Oracle is expected to be the tenant of the new campus, the people said. Blue Owl Capital Inc. is providing equity for the transaction, they added.

BorderPlex Digital Assets, an Austin-based firm, is facilitating the development in partnership with STACK Infrastructure, a data-center operator owned by Blue Owl, which is constructing the facilities.

Pricing is being discussed at 2.5 percentage points over the Secured Overnight Financing Rate, the people said. The maturity is expected to be four years, with the option to extend the maturity twice for 12 months at a time, the people said.

Representatives for SMBC, BNP, Goldman Sachs, MUFG, Blue Owl and Oracle declined to comment. Representatives for BorderPlex and STACK did not respond to requests for comment.

This deal is similar to a $38 billion loan package banks are providing in two tranches to help finance the construction of data centers in Texas and Wisconsin. Vantage Data Centers is developing both of those facilities, which are set to be used by Oracle to power OpenAI.

Issuers have flooded multiple debt markets this year, seeking cash to meet an unprecedented need for new data centers that power products like OpenAI’s ChatGPT. Morgan Stanley estimates that capital expenditures on AI could exceed $3 trillion in the next three years.

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In project finance, a group of banks typically provide construction loans, syndicate the debt to a wider group of banks to spread the risk, and then hold the debt until maturity. But data center financing has also come in the form of investment-grade bonds, high-yield bonds and private credit loans.

In recent weeks, Meta Platforms Inc. sold $30 billion of investment-grade bonds in a record-shattering transaction, and also sealed a nearly $30 billion private capital deal with Blue Owl and Pacific Investment Management Co. to help finance its Hyperion data center site in Richland Parish, Louisiana. In September, Oracle sold $18 billion in high-grade bonds amid massive investments in AI infrastructure.

In the junk-bond market, TeraWulf Inc. raised $3.2 billion and Cipher Mining Inc. raised $1.4 billion to help fund data center construction costs.

The New Mexico project has also received significant support from the local government. Commissioners from Doña Ana County approved a $165 billion industrial revenue bond package and a sweeping set of tax incentives tied to the sprawling AI data center project, moving forward with one of the largest economic development efforts in the state’s history.

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