Financing structure of Hyperion by Meta

By Sukhrob Murodov

I really liked the financing structure used in the construction of Hyperion, a Meta Data Center being constructed in Louisiana:

Meta is hiring by a “bucketload”, borrowing and issuing stocks that equal $30 billion taken overall.

The deal has been called “Beignet”, where in Meta will take most of the debt off its financial statements, and instead report information related to this particular project on consolidated, separate financial statements. Beignet involves Blue Owl, Pimco, and Meta. 

This is how things are moving:

Out of the total $30 billion, $3 billion is allocated as an 80% private-equity stake (80% ownership in the data center) to Blue Owl, one of the players in the “Beignet” mentioned above. Meta retained the remaining 20%, since it invested $1.3 billion “out of pocket”. The other $27 billion were received through the issuance of bonds, wherein bond holders will reclaim the amount lent through accumulated interest and the face value of the principal amount (what they gave in the beginning). Pimco purchased $18 billion of those bonds at a 6.58% interest rate. 

Now, the Beignet Investor (the name of the project) is going to own the data center site, not Meta. Meta is just a leaseholder, where the rent payments will go towards financing the debts from bonds and paying the dividends to the Blue Owl. 

What’s more interesting is that Meta will be renewing the lease every 4 years so it’s not deemed to be a long-term liability on the balance sheet, because these usually scare off the investors. 

But in the age of AI frenzy that will highly likely cool off, who guarantees the outcomes and lowers the risks? In case Meta walks away, Blue Owl would sell the Centre, and use the proceeds to pay off bonds and then itself. If the proceeds don’t stretch that long, Meta agreed to pay out of pocket.

As a managing director at Blue Owl stated, “it’s a fixed-income risk with an equity-like return”. 

Source: Wall Street Journal, “Three AI Megadeals are breaking new ground on Wall Street”.