DataBank Issuer and DataBank Co-Issuer is preparing to raise $715 million from the asset-backed securities (ABS) market, largely secured by leasehold and fee simple ownership interests on thirty data center properties.
Leasehold interests in 15 multi-customer enterprise data centers, accounting for about 49.3% of the transaction's net operating income, represent the largest revenue type, according to a pre-sale report from Kroll Bond Rating Agency. Fee simple ownership interests on 14 properties represent 48.6% of the DataBank's net operating income, according to the rating agency. One data center is subject to a 99-year air space lease located in Atlanta, and it represents a tiny slice, 2.1%, of net operating income.
DataBank Holdings' customers use the space to house and cool their data center equipment for Web hosting, routers and servers, according to a pre-sale report from KBRA. Also, some customers also pay for interconnection and network services, and to manage their cloud equipment.
Deutsche Bank Securities is the sole structuring advisor and joint bookrunner on the deal, which will issue just one class of notes. KBRA said.
DataBank 2023-1 employs a number of enhancement features to bolster note repayment. One is a turbo principal amortization mechanism after its anticipated repayment date. This transaction, along with the two others that the program has issued, will pay interest-only prior to their anticipated repayment dates. Beginning on those appointed dates, the deal will execute a full cash sweep to begin paying down the notes sequentially, when more than one series has reached its anticipated repayment date.
DataBank will also benefit from performance triggers. If the deal's three-month average debt service coverage ratio falls below 1.35x, then the full amount of excess cash will be deposited in the cash trap reserve until conditions are corrected.
Two other types of reserves support the notes—one for a senior note interest and expense, and another for imposition, insurance and operating expenses.
Finally, the notes benefit from loan-to-value tests. If the LTVs on the class exceed a certain threshold, that triggers an amortization until the class is back in compliance, KBRA said.
The rating agency pointed to the DataBank's experienced senior management team as a potential credit positive. In July 2016 the global investment firm DigitalBridge led a consortium to buy DataBank so that it could create an enterprise data center platform based in the U.S., KBRA said. The principals of DigitalBridge have been investing in digital infrastructure for two decades, and they manage a $32 billion portfolio of digital infrastructure assets on behalf of shareholders and limited partners.
KBRA expects to assign an 'A-'rating to the Series 2023-1, class A-2 notes, which have an anticipated repayment date of Feb. 25, 2028 and a final maturity date of Feb. 25, 2053.
