What makes the cut as a material event?
It’s a question that has bedeviled Wall Street for years. And it’s a growing concern for credit investors in the fast-growing world of data center finance as they demand greater disclosure on projects’ construction progress amid energy bottlenecks, permitting delays, community opposition and political pushback.
“You’ve got the lenders on one side that want to have project finance-level, 360 degree information, and the borrower that wants to go about their business,” said John Bridge, partner at McDermott Will & Schulte. “That’s very much the general vibe.”
The heightened focus on due diligence and materiality comes amid development mishaps that have weighed on data center bonds over concerns that lenders will have to wait longer for these projects to produce cash flow and service the debt. Investors say when potential delays arise a perceived lack of transparency can make them uncomfortable with holding debt that amounts to a bet on developers’ ability to deliver projects on time.
Such mishaps include reports that Oracle sent a notice invoking “force majeure” to lenders backing its New Mexico data center project. Permitting concerns have also drawn heightened scrutiny to Tract’s data centersin Nevada...
