Stargate receives another $18 billion in loan support, with a consortium of 20 banks providing financing for Oracle data centers

The report states that this transaction is managed by Sumitomo Mitsui Banking Corporation, BNP Paribas, Goldman Sachs Group, and Mitsubishi UFJ Financial Group as management agents. Four banks will distribute the shares of this loan through the “retail syndicate” model, and the subscription commitment will expire in late November. The pricing of this transaction is being discussed at the level of SOFR plus 2.5 percentage points. The expected loan term is four years, with the option to extend it twice for 12 months.

A consortium of about 20 banks will provide approximately $18 billion in project financing loans for the construction of Oracle’s affiliated data center campus.

On November 7th, according to sources cited by the media, the transaction was managed by Sumitomo Mitsui Banking Corporation, BNP Paribas, Goldman Sachs Group, and Mitsubishi UFJ Financial Group as management agents. Oracle is expected to become a tenant of this new data center campus located in New Mexico.

Four banks have introduced other banks to participate and are currently distributing the share of this loan to more banks and institutional investors through the so-called “retail syndicate” model. According to reports, the subscription commitment will expire in late November.

The data center campus is part of the Stargate project, led by OpenAI, SoftBank Group, and Oracle, aimed at rapidly investing $500 billion in building AI infrastructure in the United States. According to Morgan Stanley estimates, capital expenditures in the AI field may exceed $3 trillion in the next three years.

Transaction details, New Mexico approves massive incentives

According to reports, the pricing of this transaction is being discussed at the level of guaranteed overnight funding rate (SOFR) plus 2.5 percentage points. The expected loan term is four years, with the option to extend it twice for 12 months.

The development of this project is driven by a collaboration between BorderPlex Digital Assets, an Austin based company, and STACK, a data center operator under Blue Owl responsible for facility construction.

In this approximately $18 billion loan, Blue Own Capital provided equity support for the transaction.

In addition, the project has received strong support from the local government. New Mexico commissioners have approved a $165 billion industrial yield bond program and a range of comprehensive tax incentives to drive this massive AI data center project.

Diversified financing channels

Since the beginning of this year, in order to meet the demand for new data center construction represented by OpenAI, issuers have flooded into multiple financing markets seeking funding.

This transaction is similar to the $38 billion loan plan provided by the bank to Vantage Data CITIC in two batches.

Vantage is developing these two facilities in Texas and Wisconsin, both of which are planned to be used by Oracle to support OpenAI’s computing power needs.

In the field of project financing, bank consortia typically provide construction loans and then distribute the debt to a wider group of banks to diversify risk, and hold it until maturity. But now, the forms of financing for data centers have become more diverse.

In addition to traditional project financing loans, the construction funds for AI infrastructure also come from investment grade bonds, high-yield bonds, and the private credit market

Recently, tech giants have successively established Special Purpose Vehicles (SPVs) and joint ventures, placing billions of dollars in debt off their balance sheets. This operation can meet the huge demand for funds while avoiding direct impact on their financial condition and credit rating.

In recent weeks, Meta has sold $30 billion in investment grade bonds in a record breaking transaction and reached a nearly $30 billion private capital agreement with Blue Owl and Pacific Investment Management to fund its Hyperion data center located in Richland County, Louisiana.

In September of this year, Oracle also sold $18 billion in highly rated bonds against the backdrop of large-scale investments in AI infrastructure.

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