Some of the biggest data center financings hitting the corporate bond market are underpinned by three magic words — residual value guarantee.
For bondholders, no words can be sweeter. The RVG mechanism is one of the most valuable ways a hyperscaler tenant can provide credit support to a data center or other AI-related financings without incurring that debt on their own balance sheet.
Such guarantees, in theory, allow investors of bonds issued by data center SPVs to be pari passu with their investment-grade tenants, helping some of these AI infrastructure deals attain lofty ratings.
For example, Sopaipilla Investor — the issuer behind a data center campus in El Paso, Texas — received a AA- rating from Fitch in line with the corporate rating of its tenant Meta Platforms thanks to the inclusion of an RVG.
And the mechanism is now being featured prominently in Nvidia‘s announcement that it had lined up $500bn of financing from six of the world’s largest financial institutions, Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR.
Those commitments, as part of the platform, will be backed by a residual value support feature on a project-by-project basis, 9fin reported.
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