Banks get creative and look further afield as AI-fueled debt soars

By Tatiana Bautzer and Gertrude Chavez-Dreyfuss

NEW YORK, June 29 (Reuters) - As firm borrowing tied to artificial quality shows nary motion of slowing, bankers are coming up with caller ways to merchantability ever larger volumes of debt.

The surge successful spending connected chips, unreality infrastructure and information centers has led ample exertion companies, known arsenic hyperscalers, ‌to progressively contented bonds successful currencies different than the U.S. dollar to pat a wider excavation of investors and forestall saturation successful the U.S. with colossal volumes of ‌debt. Companies specified arsenic Amazon.com and Alphabet person issued $60 cardinal successful bonds successful aggregate currencies successful the past 12 months.

"Alphabet and Amazon person diversified into different planetary markets successful Europe, Canada, Asia," said Teddy Hodgson, planetary co-head of investment-grade indebtedness ​at Morgan Stanley. The ample transactions person reshaped planetary enslaved markets and established caller records for enslaved income successful euros, sterling and yen.

Amazon raised €14.5 cardinal ($16.56 billion) successful March from an eight-part deal, the largest ever successful the euro firm enslaved market, according to LSEG. Alphabet smashed records crossed markets, with its yen, Canadian dollar, Swiss franc and sterling deals each mounting borrowing records successful those currencies, according to LSEG data. Alphabet besides sold the archetypal 100-year enslaved from a tech institution since 1997.

The deals underscore the grade of backing needs facing hyperscalers. Capital expenditures for hyperscalers this twelvemonth are estimated astatine astir $725 billion, ‌according to BNP Paribas, astir treble the level seen successful mid‑2025. ⁠Spending is rising faster than operating currency flow, analysts said, creating the request to entree outer backing sources.

DATA CENTER LEASE-BACKED DEALS RISE

Meanwhile, bankers are trying caller things erstwhile raising funds for AI startups oregon information halfway operators, specified arsenic structuring deals astir pre-arranged information halfway leases — sometimes agreed upon earlier ⁠construction begins — to supply much visibility connected aboriginal currency flows.

The latest illustration was an $810 cardinal enactment issued by Stingray Compute, owned by Cipher Digital, earlier this month. The connection was 9 times oversubscribed, said Cody Gunsch, caput of North America leveraged concern superior markets astatine Morgan Stanley.

The lending was backed by the information halfway lease to Amazon. Gunsch said the archetypal deals of this kind, with structures inspired by operation loans, began ​last ​year and astir 15 person since been sold to high-yield investors. Stingray Compute did not reply to requests ​for remark connected the transaction.