First-time asset-backed bond sellers TierPoint Issuer and TierPoint Co-Issuer are preparing to market $925 million in notes to investors.
Two series of notes—2023-1 and 2023-2—will be repaid from a stream of revenue on 31 multi-customer enterprise data centers located in 23 markets around the country.
Nine of the data centers are owned and 22 are leased, according to a pre-sale ratings report from the Kroll Bond Rating Agency. The 31 data centers make up about 584,376 square feet of data center space and can provide about 63.5 megawatts of critical load power to its data center customers. They also generate approximately $397.2 million in total annualized monthly recurring revenue (AMRR).
The top 10 buildings in the pool generate 59.3% of annualized monthly recurring revenue (AMRR), with the very largest accounting for 10.6% of the pool's AMRR, according to KBRA. Pennsylvania accounts for the largest exposure in the pool by state, where TierPoint has four facilities accounting for 20.3% of AMRR, which are considered positives from a credit standpoint, according to KBRA.
Another positive aspect of the deal, according to KBRA, is that the portfolio is well diversified by tenant revenue. The company noted that of the 31 sites just three generate more than half of their revenue from the top three tenants at the data centers. The occupants consist of more than 2,900 customers that represent a wide range of industries and account for 8,900 contracts. Diversified mix, technology and finance are the top three industries and represent 25.5%, 25.0% and 16.0% of AMRR, while all other industries represent less than 11%, ratings analysts said.
While assessing the transaction structure, KBRA noted that the deal has several performance triggers. If the three-month average debt service coverage ratio drops below 1.5x, then 50% of excess cash is deposited in the cash trap reserve until the situation cures. If the three-month average DSCR drops below 1.35x, then 100% of cash will be deposited in the cash trap reserve until the situation corrects, KBRA said.
The deal also includes senior note interest and expense reserves, and loan-to-value tests.
