The way the recent deals have been structured is that the capacity and thus revenue is pre-booked, which upgrades the credit quality in the eyes of the lenders. Blue Owl is private equity, so they are likely loading the special purpose vehicle itself with the debt (in a way that it off Meta's balance sheet, which is the primary objective), and then possibly funding the capital outlay through secondary markets (if not now, then perhaps later they can bundle it up and sell it - it's Meta adjacent so they will have no problem selling on that debt).

If Blue Owl is providing capital for an equity slice, they get huge leverage on their cut baked into the deal. Pension funds that may end up buying debt in the deal eventually don't want to actually fund the equity of the project and take the risk booting it all up while sitting at the front of the capital stack with corresponding risk of getting wiped out (even if it's a Meta partnership), they simply want securitized fixed income, and make it as vanilla as possible.

So the question is more "will Private Credit (or pension funds/institutions) take debt backed by datacenter collateral with long term service agreements with Meta" and the answer is yes. There is much lower quality stuff than that in the PC space.

This makes a lot of sense.

But the one thing that doesn’t compute is the commitment. There is a long term obligation now incurred by meta to use this infrastructure. If it’s a capital lease I assume this is now a liability on their books (and disclosures)?

This seems to be a widespread practice lately, so there must be something going on here. Aside from the balance sheet/accounting angle...

Maybe they don't want to securitize their core assets and introduce a new favored class of investor. Ex: If they are securitizing their AI data centers as part of the initial capital raise, those investors would be higher up the capital stack. They would get the datacenter in a theoretical bankruptcy before the bond/equity holders got their cut of the liquidation. Intel securitized their new fab builds with Brookfield and Apollo and, as a shareholder at the time, it didn't feel great. No idea what the precedent is regarding Meta by the way, just a thought.

Maybe they think that the lenders are a bit "overzealous", and they want to push the risk of things like write down on GPU racks entirely onto external parties who are apparently all too happy to take the risk.

I'm guessing it's a mix of both, combined with the fact that we're seeing some copy and paste thinking. This is proving to be a way to get fast access to the huge private credit market. I would assume there must be some very wide deal flow pipes cranking currently, so why not tap into them if the demand is there in the other end.

Too much money chasing too few investment opportunities with large potential returns. Risk really isn't being acknowledged these days.

Everyone is very silent on AGI in the past months.

The latest from AI is better targeted ads and better adult content didn't you hear?

I don't know about AGI, but AI employees replacing human labor is well within range today.

Excel sheets have replaced many humans too. Pretty low bar for AGI if you'd ask me.

Not replaced, made more efficient—the "replacement" is indirect.

Actual replacement involves no human in the loop, an entire firm that is 100% AI labor is possible.