Around the time that Aligned Data Centers completed a $1.18 billion asset-backed securities (ABS) deal on July 21, ending a three-year hiatus from the market. , a consortium of funds led by Artificial Intelligence Infrastructure Partnership, MGX Fund Management and Blackrock's GIP acquired the company at a full valuation of $40 billion. It was one of the largest private investments in datacenter infrastructure to date. A top datacenter developer, Aligned Data has focused its data centers in prime locations in the U.S. as well as Brazil and Chile.
A key piece for investors was the visibility.
Investor demand allowed the ABS deal to be upsized by 30% from the original $905 million target, and the transaction is backed by rents from 14 tenants located in the firm's campuses in Northern, Va., Chicago and Dallas. S&P Global offers a long list of deal strengths, including the tenants' high average credit quality, with 90.7% of occupants holding investment-grade ratings. It also lists several weaknesses, such as limited industry diversity illustrated by one BBB-rated client providing 46.8% of the deal's annualized adjusted base rate, and the top five tenants providing 96.7%.
"A key piece for investors was the visibility: Being able to underwrite and see the quality of the underlying customers and the nature by which the cashflows coming from the trust are derisked," said Meghan Baivier, chief financial officer at Aligned Data since September 2024.
Baivier joined Aligned Data from Easterly Government Properties, where she held top positions including president, chief operating officer and CFO. She earlier worked in both the buyside and sell-side firms. She recently discussed with Asset Securitization Report how ABS fits into the company's capital structure and which trends are shaping the datacenter ABS market.
ASR: What prompted your move to Aligned Data Centers?
Baivier: It was an exciting opportunity to join a company undergoing tremendous growth and helping build out the digital infrastructure, and to work with my executive team and an incredible sponsor relationship [with Macquarie Asset Management and its investment partners].
ASR: How does ABS fit into the company's overall capital structure and funding strategy?
Baivier: We think of our debt capital strategy as conveyor belt financing, if you will. We have a warehouse development credit (Devco) facility that comprises commitments from a couple dozen banking partners, and that's very efficient financing for early-, mid- and late-stage development assets. Earlier this year, we raised an institutional devco facility that is a similarly cross-collateralized, warehouse development facility targeted at mid- or late-stage development assets, and we employ other development structures such as project finance. Once the asset is completed, moving from left to right on the proverbial conveyor belt, we establish stabilized funding, such as the ABS transaction this summer.
The data-center space is burgeoning and growing over time, and I suspect we'll soon drop the esoteric label.
ASR: How do you define "stabilized funding?"
Baivier: It provides stabilized asset financing, typically a five-year anticipated repayment date (ARD). So not the longest financing structure but well suited for our legacy, multi-tenant projects.
ASR: The ABS transaction was increased in size by 30%. What type of investors sought to participate in the deal?
Baivier: The typical public market investors, and we were able to bring in some new institutional investors.
ASR: What types of new investors invested in the deal?
Baivier: The digital infrastructure market, and specifically data centers, has matured considerably over the last 24 months, and even more so in the last 12. It's still viewed as an esoteric class within the ABS market. As such you have a lot of investors doing a lot of research to understand the business, the nature of the assets, and the nature of the cashflows. We were able to bring lenders who said this is their first holding in the data center space.
ASR: Were those lenders larger, more mainstream institutions?
Baivier: I would say 'yes.' We've definitely got some of the major players in the broader ABS market. The data-center space is burgeoning and growing over time, and I suspect we'll soon drop the esoteric label.
ASR: What were the key strengths of the ABS deal?
Baivier: The assets in this trust are in top-tier markets across our portfolio and they were representative of those key markets. The ratio of investment-grade counterparties representing the rental stream flowing to the trust and thus to lenders is critically important. Also, the deal's leverage was relatively low. All three of those attributes contributed to the execution.
ASR: Do you anticipate more data center ABS deals, especially as more projects require stabilized financing?
Baivier: Yes, we absolutely expect ABS to be an important component of our stabilized debt strategy, without a doubt. We think it's a growing market, and it can be a very efficient market.
ASR: Do you anticipate Aligned Data to issue ABS more regularly and frequently?
Baivier: A part of why we had not been back to the market since 2023 was that we were growing and developing, and so raising capital that was as flexible as possible. Now that we know what our equity ownership will look like for our next chapter of growth, the ABS structure is something we expect to return to with more frequency.
