(Bloomberg) -- Fresh off executing a landmark junk bond sale, data center firm TeraWulf Inc. is now exploring ways to access the leveraged loan market for its AI infrastructure build out.
The company is working with Morgan Stanley and other banks on developing loan products, its Chief Financial Officer Patrick Fleury said in an interview. While TeraWulf's next financing deal will still likely be a high-yield bond, "it could also be a loan," he said.
About eight months ago, TeraWulf sold $3.2 billion of high yield bonds to expand a data center in New York, marking the biggest junk sale led by one Wall Street institution — in this case also Morgan Stanley — in more than three decades. Technology companies are tapping all corners of credit markets to meet AI's unprecedented funding needs, driving Wall Street to engineer new debt structures to keep pace.
"TeraWulf and many of its peers are actively working with banks on these products," Fleury said. "The plumbing is largely there; the market is simply waiting for additional transactions to establish precedent."
That precedent arrived in late April when CoreWeave Inc. launched a first-of-its kind leveraged loan deal backed by customer contracts for graphic processing units from firms including OpenAI. The $3.1 billion loan racked up some $19 billion of investor orders, Bloomberg reported.
Accessing loan investors also provides a route to the collateralized loan obligation market, which represents the biggest buyers of leveraged loans, according to Fleury. That "opens up a significant new source of capital for the sector," he said.
TeraWulf — which is pivoting from its bitcoin miner roots — has been expanding its data center footprint, recently acquiring a high-performance computing development site in Eastern Kentucky.
"Given the scale of capital required to build HPC infrastructure, expanding the available financing toolkit is an important step in the maturation of the industry," said Fleury.
The $3.2 billion high-yield bond it sold in October — the first ever for a crypto miner — was to finance a portion of its data center expansion at its Lake Mariner campus in Barker, New York. TeraWulf nabbed more than $11 billion worth of orders from investors who were drawn by the deal's so-called "backstop" from Alphabet Inc.'s Google. The Big Tech company is set to guarantee the debt once the facility is running.
"As more transactions came to market, investors became increasingly comfortable with the asset class and financing terms evolved accordingly," Fleury said. "I think you'll see a similar progression in the leveraged loan market as additional issuers access the product."
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