Morgan Stanley-led bank consortium prepares USD 15 bn bond sale to dump pre-built AI construction risk

A Morgan Stanley-led bank consortium is looking to get USD 15 bn of AI construction debt off its books by tapping the bond market, in the latest sign that Wall Street lenders are getting squeamish about holding AI infrastructure risk, the Financial Times reports. The debt is tied to a 2k-acre Google-backed data center under construction in Hubbard, Texas, and leased to Anthropic.

A growing trend: Bulge-bracket banks have reportedly spent months looking for buyers on more than USD 50 bn of debt tied to separate data center projects leased to Oracle. Offloading exposure caps how much AI risk any one bank carries and frees up room to keep lending into the next play.

How the debt is structured tells you where the risk sits: Developer Nexus Data Centers built this specific loan around a delay-draw feature — meaning money gets released in stages as construction hits certain agreed-upon milestones, rather than all at once — and part of the package may get refinanced through leveraged loans instead of bonds, per the FT.

Google’s guarantee doesn’t cover the building phase, and that’s the whole crux of it: The backstop only applies once the facility is finished, so bondholders are effectively underwriting construction itself, delays, cost overruns, and the works. That’s why the debt is expected to price at speculative grade despite Google’s name being on the project. The campus’ dedicated on-site gas plant, which is built to dodge Texas grid delays, adds a second layer of risk to the same debt package.

If you’re wondering whether Gulf money is circling this one… Nothing so far suggests the region’s state-backed investors are in this specific sale, but they already have a dedicated vehicle for underwriting exactly the kind of AI infrastructure debt Wall Street is looking to offload here. Whether that firepower stretches to a transaction shaped like this one (construction-stage, speculative-grade, single-tenant) is an open question.

IN CONTEXT- UAE sovereign investor MGX’s AI Infrastructure Partnership with BlackRock, GIP, Microsoft, and Nvidia was structured from the outset to deploy USD 30 bn of equity, and as much as USD 100 bn in total investment value, including debt. MGX has also raised more than USD 50 bn from sovereign and institutional investors and plans to deploy up to USD 10 bn a year, closing one of the largest data center buyouts on record alongside BlackRock late last month — the USD 40 bn Aligned Data Centers acquisition.

MARKETS THIS MORNING-

Losses across tech firms pushed Asia-Pacific markets down this morning. South Korea’s Kospi led the drop — falling 4.6% — while Japan’s Nikkei and Hong Kong’s Hang Seng also suffered losses. Bucking the trend, the Shanghai Composite moved higher.

THE CLOSING BELL-

The ADX rose 0.1% yesterday on turnover of AED 1.5 bn. The index is up 1.2% YTD.

In the green: Apex Investment (+8.0%), Eshraq Investments (+5.4%), and Waha Capital Company (+4.8%).

In the red: Fujairah Cement Industries (-3.8%), Invest Bank (-3.4%), and Gulf Medical Projects Company (-2.9%).

Over on the DFM, the index rose 0.4% on turnover of AED 682.2 mn. Meanwhile, Nasdaq Dubai was up 0.3%.