Blackstone’s QTS is cutting AI debt sale by more than half - The Business Times
QTS, a data center operator backed by Blackstone, is slashing the size of a planned private debt sale by about 60 per cent after struggling to attract enough demand from investors – and refusing to pay much higher yields.
The company is raising about US$300 million after initially targeting roughly US$800 million, according to people with knowledge of the transaction.
Some investors balked at the price the borrower was offering, while some faced constraints because the company has tapped the private placement market several times, the people said, asking not to be identified discussing a private matter.
Artificial intelligence companies are facing challenges as they tap every corner of capital markets from investment-grade bonds to project financing to finance investments that could run into the trillions of dollars in the coming years.
QTS has raised billions of dollars in the private-placement market through at least two debt sales over the past 18 months. That includes a US$1.65 billion high-grade bond sale last year and another US$800 million financing.
Blackstone was reluctant to offer significantly higher yields on its latest borrowing because it finances frequently across multiple markets and issuers, according to the people. Wider pricing on the QTS transaction could establish a more expensive reference point for investors evaluating other Blackstone-related debt, the people said.
The US$300 million financing included a US$100 million seven-year US private placement that was priced on Friday to yield 2.45 percentage points more than benchmarks. It also includes a US$200 million five-year bank loan portion that is expected to be priced in the coming weeks, one of the people said, asking not to be identified discussing confidential information.
Blackstone opted to proceed with a smaller financing at its desired pricing, instead of hiking spreads and raising the full US$800 million.
The data center developer had planned to use the US$800 million private placement to refinance existing five-year bank debt. With the smaller offering, that bank financing can remain in place, one of the people said.
A representative at Blackstone declined to comment.
The private placement market is significantly smaller than the public bond market and is dominated by investors such as life insurers and asset managers that typically hold the debt for the long term, potentially limiting how much exposure they are willing to build to a single borrower over a relatively short period.
Issuance in the investment-grade true private placement market last year was just above US$200 billion, according to the Private Placement Monitor.
QTS has also tapped other credit markets this year. It sold project finance green bonds in April and August, borrowing US$4.6 billion for the first deal and US$3.9 billion for the second.
Blackstone acquired QTS in 2021 for about US$10 billion including debt. The data-center operator has since tapped multiple pools of capital to finance its expansion amid a surge in spending on infrastructure needed to support AI. BLOOMBERG
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