Social media giant Meta Platforms (META), along with Morgan Stanley (MS) and a team of lawyers and bankers, raised over $30 billion in order to build a massive new AI-focused data center in Louisiana called Hyperion. To avoid adding this debt to its balance sheet, Meta placed the project into a separate legal entity called a special purpose vehicle (SPV) named Beignet Investor, according to The Information. As a result, major investment firms like Pimco and BlackRock (BLK) bought the $27.3 billion in bonds used to fund it, while Blue Owl (OWL) invested $2.5 billion in equity and took an 80% ownership in the SPV.
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In addition, to further help keep the debt off Meta’s books, the company structured the data center leases into four-year terms instead of signing a long-term 20-year lease. Interestingly, to make sure the deal wouldn’t hurt its credit rating or financial standing, Meta obtained a private letter from the SEC confirming its plan on how it would handle the accounting. It also checked in with credit rating agencies Moody’s (MCO) and S&P (SPGI), both of which said the transaction wouldn’t affect Meta’s strong credit rating for now. As a result, this structure gives Meta more flexibility.
In fact, if the company no longer needs the data center, it can exit earlier than usual and only owe investors a residual value payout, which doesn’t immediately count against its debt. Moreover, the bonds were a hit with investors like insurance companies and pension funds because they offer a 6.6% yield, which is higher than Meta’s usual bonds but still rated A+ by S&P. Lastly, these bonds mature in 2049 and match the long-term funding needs of many institutions.
Is Meta a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on META stock based on 40 Buys, six Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average META price target of $878.09 per share implies 16.2% upside potential.
