DataBank Holdings is preparing to sell more than $1 billion in securitization bonds, secured by revenue connected to newly developed turnkey data centers in three primary markets.
The asset-backed securities (ABS) are secured by the data centers in Ashburn, Va.; Atlanta, Ga.; and Orangeburg, New York; related leases made to predominantly hyperscale tenants, first-priority mortgage liens; and equipment and fixtures at the data centers, according to analysts at Moody's Ratings.
The transaction DataBank Issuer II and DataBank Co-Issuer II, are known as HYPER 2025-1. It is DataBank Holdings' first hyperscale data center ABS deal.
This is also a first for Moody's, which is applying its new data center securitization methodology with this deal.
HYPER 2025-1 will issue the tranches of class A and B notes. The A1V and A2 both have a legal final maturity in September 2055.
The deal is slated to close on September 23.
Moody's says the assets are of high quality. They are newly constructed, turnkey properties with about 100 megawatts of combined capacity. They are 100% leased, primarily to investment grade hyperscale tenants under long-term leases, resulting in strong contractual cash flows, Moody's said.
Almost all the leases, 99%, are modified gross + electricity. They feature a design power usage effectiveness of 1.50. A higher design PUE allows the center to accommodate various types of customers, not just hyperscalers, to accommodate turnover.
Several industry factors bode well for the datacenter market. Enterprise and government customers are rapidly migrating toward cloud computing, digitization and virtualization, supporting demand for data storage. Global IT traffic is also increasing, a result of improved global connectivity, and the increased use of 5G, Moody's said.
Yet HYPER 2025-1 faces several challenges, included concentrated tenancy, high initial leverage (13.0x) and combined loan-to-value of 72.1%. Moody's says the class A notes will have a leverage of 11.9x and a CLTV of 65.8% of the appraised value.
While demand for data center services are on firm footing, computing technologies will rapidly evolve, and data center owners might have to spend more capital to keep the facilities up to date.
Moody's assigns A3 to A1V and A2, according to the rating agency.
