Meta hiding $27B in debt using advanced geometry
13 days ago
- #Meta Platforms
- #Data Center Investment
- #Off-Balance-Sheet Financing
- Meta Platforms Inc. is involved in a $27.3 billion joint venture with Beignet Investor LLC, an affiliate of Blue Owl Capital, to develop a 2.064 GW hyperscale data center campus in Louisiana.
- The structure allows Meta to keep approximately $27 billion of assets and debt off its balance sheet while maintaining economic support through guarantees and leases.
- Beignet Investor LLC issues $27.30 billion in senior secured amortizing notes, preliminarily rated A+ by FSG LLC, reflecting strong contractual linkage to Meta.
- Meta guarantees construction cost overruns, lease payments, and provides a residual value guarantee (RVG), ensuring bondholders are repaid even if the data center's market value declines.
- The transaction involves complex legal and accounting structures, including variable interest entity (VIE) considerations, to avoid consolidation on Meta's balance sheet.
- Lease terms are designed to ensure stable cash flows, with Meta responsible for all operating costs, maintenance, and potential damages, under triple-net leases.
- Key risks include off-balance-sheet dependence, concentration risk with a single tenant (Meta), and uncertainties around the residual value of the data center in volatile markets.
- The outlook is 'Superficially Stable,' contingent on Meta's continued AA-/Stable credit rating and adherence to the structured financial and lease agreements.