U.S. data center operator Vantage has raised 720 million euros ($821.4 million) — the first of its kind deal in Europe.
The asset-backed securitization (ABS) deal, the first ever euro-denominated with data center assets on the continent, involves four data centers in Germany.
The company said it will be paying on average a 4.3% coupon on the bonds issued through the process.
In an ABS deal, a company raises money by using its data center infrastructure and future revenues from the facilities as collateral.
Vantage said it will use the funds primarily to pay off existing construction loans previously secured for the facilities.
“We believe the ABS market in particular is kind of best suited for our type of asset, which is real estate centric, high credit quality tenants, long term leases, something that is almost perfect for the ABS investor,” Sharif Metwalli, chief financial officer of Vantage Data Centers, told CNBC.
Vantage added that despite the large sum borrowed, the demand from investors exceeded the amount raised.
“So this transaction was actually pretty highly levered, frankly,” Rich Cosgray, senior vice president of global capital markets at Vantage Data Centers, told CNBC. “It was higher leverage than our prior transaction and we had some investors that just weren’t comfortable at that leverage level.”
“Yet, despite that, we were basically two and four times oversubscribed on the respective financings, and we were able to tighten pricing pretty meaningfully through the marketing process,” Cosgray added.
The four facilities — two in Berlin and two in Frankfurt — have access to around 64 megawatts of power and “are fully leased to hyperscale customers,” the company said in a statement.
The data centers were valued at about $1 billion earlier this year by Scope Ratings. The credit rating agency has rated two of the notes issued by the company, worth 590 million euros and 50 million euros as A-rated “strong credit quality” and BBB-rated “good credit quality” respectively.
The company has so far issued about $7.5 billion in asset-backed securities globally across nine transactions. The investors for the euro-ABS deal are believed to be insurance companies, pension funds, and fund managers.
Last year, Vantage also raised £600 million through the first-ever securitization of a data center in Europe, the Middle East and Africa (EMEA). The deal involved two units from the company’s Cardiff campus with 148 megawatts of electricity power. Across the region, the company has 2,500 megawatts of data center capacity either operational or under development.
The deal by Vantage comes at a time of increased demand for data centers, as Big Tech firms and others in the technology sector scale up their artificial intelligence usage.
In particular, the European data center market is expected to grow by 20% in 2025, according to the property consultancy CBRE. Frankfurt, London, Amsterdam, Paris, and Dublin are cities with the biggest demand, yet the need for dispersed facilities by cloud service providers is leading the growth of data center construction in tier-two markets as well.
Unlike the U.S., however, the securitization of European data centers is still an “emerging asset type”, according to rating agency Morningstar DBRS.
“I think investors are getting more comfortable in EMEA with this as an esoteric asset,” said Vantage’s Metwalli, and pointed to outsized demand from investors for their 720 million euros issuance.
The transaction was led by Barclays Bank and Deutsche Bank as joint lead managers, and Vantage was represented by the British law firm Clifford Chance.
