In a master trust agreement, Flexential Issuer and Flexential Co-Issuer are preparing to sell $1.4 billion in securitization bonds secured by revenue from colocation data center revenue.
The asset-backed securities will be issued through Flexential series 2026-1 and 2026-2, backed by 19 leasehold interests located in 11 markets and nine fee simple ownership interests in multi-customer enterprise data centers, according to Kroll Bond Rating Agency.
The leasehold and fee simple ownership account for 58.1% and 41.9% of AANOI, respectively.
Some investors have been increasingly bullish about colocation data center assets over hyperscale projects, especially due to attractive spreads compared with corporate bonds, according to Deutsche Bank's takeaways from the SFVegas 2026, published in its March 2 "Securitization Research The Outlook".
They also feel that the properties offer diversification away from recent concerns about artificial intelligence, Deutsche said.
For this deal, 28 data centers and 10 owned assets are in the collateral pool, according to KBRA. The largest data center accounts for 10.3% of the pool's $663.3 million in annual revenue, the rating agency said.
Class A1 notes in Flexential series 2026-1 will issue variable rate notes, while the remaining four tranches in series 2026-1 and 2026-2, will issue fixed-rate notes, according to KBRA.
The A2 tranche in the 2026-1 series will issue the bulk of notes $765 million, with an A- rating, and a March 2031 anticipated repayment date. Its legal final maturity date, March 2061 is the same for all outstanding notes in the issuance, KBRA said.
Only one Flexential 2026-2 tranche will come to market, a class A2 issuing $150 million in notes, with an A- rating, KBRA said. Its anticipated repayment date is March 2033
Deutsche Bank Securities is the deal's sole structuring advisor and active bookrunning manager, the rating agency said.
KBRA says the A1 and A2 notes in each series are pari passu in priority to each other and senior to the class B notes. The same arrangement holds down the deal's structure, so that all notes in the same seniority position are pari passu to each other and senior to the next subordinate level of notes.
Classes A1 and A2 in the 2026-1 series have a loan-to-value (LTV) ratio of 58.2%, while 2026-2, A2 and 2026-1 class B have an LTV of 61.7%. The 2026-1, class C notes have an LTV of 63.5%.
Among the deal's structural protections, Flexential includes a cash-trap provision. If, at the end of a month, the three-month average class A debt service coverage ratio (DSCR) is below 1.35x and an amortization period is not in effect, then 100% of remaining available funds will be deposited into the cash trap reserve sub-account.
