Sustainable finance is part of a greener bottom line for the data center industry, as leading players align their capital with their focus on sustainability.
Aligned has taken a big step into that future, arranging $1.75 billion in sustainable financing to expand its digital infrastructure business. The package includes $1.35 billion in securitized notes that qualify as sustainable loans, which Aligned says is the first such funding in the data center industry, as well as $375 million in a new sustainability-linked loan (SLL).
The funds will accelerate Aligned’s growth, allowing the developer to acquire land in key U.S. and international markets for new construction, as well as expanding its existing data center campuses.
The huge deal also illustrates Wall Street’s interest in the intersection of digital infrastructure and sustainability, which can create financial products to help address ESG criteria (environmental, social and governance) in selecting targets for lending and funding. Aligned worked with a constellation of leading financial firms to line up the sustainable funding package.
For Aligned, sustainable finance is one more way it can match the priorities of its largest customers, including hyperscale operators that have set ambitious targets for reducing or eliminating their climate impact.
“We believe that sustainability isn’t a passing trend; it’s a competitive advantage to modern data center operation and a key pillar of our customers’ success,” says Andrew Schaap, CEO of Aligned. “Furthermore, we’re very fortunate to have leading financial institutions in our corner whose business ethos complements our vision of environmentally responsible data center infrastructure, and transparency and accountability in targeting — and exceeding — our long-term sustainability goals.”
Sustainability, Baked Into Everything
Aligned is one of the beneficiaries of growing interest in sustainable finance, as investors seek to align their portfolios with climate resilience. In our 2021 forecast, Data Center Frontier highlighted sustainable financing as one of the eight trends that would shape the digital infrastructure industry this year.
The new funding comes just weeks after Aligned increased its senior secured credit facility by $250 million to $1.25 billion. When the credit line was announced last September, Aligned became the first data center company to use a sustainability-linked loan (SLL), in which the borrower earns a lower interest rate by hitting benchmarks for sustainable practices. The company says it has met and exceeded all the requirements of the initial credit line, which laid the groundwork for the expansion as well as the new loans.
Aligned builds “smart infrastructure” to solve capacity management challenges through innovation in cooling and the supply chain. Its offering is positioned to appeal to technology-focused customers, especially growing Internet companies. The company recently acquired property in Salt Lake City for a build-to-suit data center project, and is also expanding into the Greater Chicago market. Aligned operates data center campuses in Dallas, Phoenix, Salt Lake City and Ashburn, Virginia.
Sustainability has long been an emphasis for Aligned, which prioritizes efficiency and energy conservation in its wholesale and build-to-scale data center solutions. Recent headlines have brought climate risk to the fore, prompting customers to focus on eliminating fossil fuels from their IT footprint. Aligned said it has matched the entire energy footprint of its data centers with purchases of renewable energy.
Securitized Notes and Sustainability
Today’s announcement features Aligned’s first use of securitized notes, in which a borrower creates a security based on the creditworthiness of a specific pool of assets, rather than the entire company. Data center developers can issue debt notes backed by cash flow from operational data centers, which are leased by some of the world’s largest and most credit-worthy companies.
That tenant credit quality enables the issuer to pay lower interest rates on its debt, which reduces its costs as it seeks to compete and build additional facilities. Securitization has been used by companies like Vantage Data Centers, STACK Infrastructure, DataBank and Sabey Data Centers.
Aligned went big with its securitized offering. A wholly-owned subsidiary of Aligned issued $1.35 billion of securitized notes, split into three tiers:
- $1.05 billion of term notes rated investment grade at A- by Standard & Poor’s
- $150 million of term notes rated investment grade at BBB by S&P.
- $150 million variable funding notes rated at investment grade at A- by Standard & Poor’s.
Aligned says the notes are the first-ever green data center securitization, and were externally verified by Sustainalytics to meet criteria for sustainability-linked loans – debt instruments that ensure a company’s overall ESG performance through sustainable performance targets agreed upon by the company and its investors
“Aligned’s issuance of $1.35 billion in securitized notes, the largest-ever inaugural, and industry-first green data center securitization, represents yet another major milestone in a series for our organization,” states Anubhav Raj, CFO, Aligned. “We’re grateful to our financial advisors and relationship banks whose confidence in Aligned’s ability to continuously innovate and solve the challenges of data center sustainability will help actualize future green data center development and market expansion as we experience surging demand.”
The package involved multiple financial firms and advisors. Guggenheim Securities, LLC acted as sole structuring advisor and joint active bookrunning manager for the securitized notes. Deutsche Bank Securities, Goldman Sachs & Co. LLC, and Wells Fargo Securities also acted as joint active bookrunning managers for the term notes. Aligned engaged ING as sustainability agent and co-manager, and Citi, Citizens Capital Markets, Nomura, and TD Securities as co-managers for the term notes. DLA Piper said it advised Aligned on the financing.