The largest private equity financing is imminent! Meta is set to sign a $30 billion financing deal to build data centers
Meta will build its largest data center project in Louisiana and complete nearly $30 billion in financing through a special purpose vehicle (SPV), setting a record for the largest private equity transaction in history. Meta retains only 20% equity, with institutions such as Blue Owl and Pimco leading the funding, while Morgan Stanley arranges the financing structure and exclusively underwrites the bonds. This transaction allows Meta to avoid adding significant debt to its balance sheet and provides a new financing template for the AI era, expanding data centers while avoiding impacts on the company's credit rating
Media reports indicate that Mark Zuckerberg's Meta Platforms is about to finalize a financing deal close to $30 billion to build data centers in rural Louisiana, marking the largest private capital transaction in history.
Insiders revealed to the media that Meta will co-own the Hyperion data center located in Richland Parish, Louisiana, with Blue Owl Capital Inc., retaining only 20% ownership. To finance the construction project, Morgan Stanley raised over $27 billion in debt and about $2.5 billion in equity for a special purpose vehicle (SPV). Currently, this structure is becoming increasingly common in large transactions.
Morgan Stanley began preparing for this deal earlier this year, attracting a large number of asset management companies and infrastructure lending institutions to participate. Ultimately, Pacific Investment Management Company (Pimco) and Blue Owl emerged as the winners. According to media reports, Pimco is the primary lending institution.
Analysts say this financing will provide a template for other hyperscalers, allowing them to develop new facilities while avoiding negative impacts on their corporate credit ratings. Faced with high construction costs, many companies are increasingly borrowing to expand. Data compiled by the media shows that as of the end of September this year, U.S. tech companies have raised approximately $157 billion in the bond market, a 70% increase compared to the same period last year.
Under the SPV structure, the financing entity is the special vehicle itself, rather than Meta directly incurring debt. Meta will act as the developer, operator, and tenant of the project, which is expected to be completed by 2029. Insiders told the media that Meta will provide nearly $6 billion in construction funding through its 20% equity stake.
This structure helps tech companies avoid putting large debts on their balance sheets and provides Wall Street investors with a channel to invest in tangible assets, allowing them to achieve investment-grade ratings. Currently, insurance companies and other investment institutions are increasingly favoring structured investments linked to assets. Elon Musk's AI company xAI is also adopting a similar model to raise $20 billion by leasing chips through a financing vehicle rather than purchasing them directly.
Bond Sales Booming
On Thursday, the parties involved in the Meta project completed the final step: pricing the bonds in 144A format. According to two insiders, a few other investors also participated in the subscription of this debt. The bonds will mature in 2049 and are fully amortizing. One insider told the media that the bonds were priced about 225 basis points higher than contemporaneous U.S. Treasury bonds. The transaction was exclusively underwritten by Morgan Stanley. S&P Global Ratings assigned an A+ investment-grade rating to this batch of securities.
Another source told the media that by Friday morning, the price of these bonds had risen to 105% of par value. This is quite rare in the investment-grade bond market, with at least $1 billion in bonds trading at a premium level within just a few hours For Pimco, this transaction is significant as the company has been seeking to move away from traditional public bond backgrounds. Earlier this year, the credit giant also entered the asset-backed finance sector in partnership with KKR, acquiring nearly 10% of Harley-Davidson's financial subsidiary and purchasing its retail loans.
The Hyperion data center, covering approximately 4 million square feet, is located in rural Louisiana and is the largest of Meta's 29 data centers worldwide. According to media analysis of government data, the center's electricity consumption when fully operational is expected to reach 5 gigawatts, equivalent to the electricity consumption of 4 million American households. A report by S&P noted that Entergy plans to provide up to 3 gigawatts of power to the Meta campus by December 2028 at the latest, provided the company can complete the construction of substations, multiple transmission lines, and power plants on schedule.
Morgan Stanley, as an advisor to Meta on the transaction, is actively expanding its influence in the AI sector. In June of this year, the bank also provided consulting for xAI's corporate bond financing and is currently marketing junk bonds for cryptocurrency mining company TeraWulf Inc. Media reports indicate that Morgan Stanley was also involved in the $40 billion acquisition of the Aligned Data Centers project led by BlackRock's infrastructure investment team.
This Louisiana project is just one of several large data center projects by Meta. Earlier this week, the company also announced plans to build another gigawatt-scale data center in El Paso, Texas, and is currently constructing a large data center in Ohio
