Blue Owl shopped debt for a CoreWeave data center. Lenders weren't sold.

Blue Owl Capital, a prominent player in the data center investment landscape, is struggling to secure financing for a $4 billion data center it is co-developing in Pennsylvania. This facility, located 80 miles west of Philadelphia in Lancaster, is set to be occupied by CoreWeave, a key name in artificial intelligence cloud computing services that has recently garnered attention due to its rapid growth and significant debt accumulation. Industry insiders indicate that lenders are increasingly wary of investing in projects associated with AI firms that have less-than-optimal credit ratings. CoreWeave, for instance, holds a B+ credit rating from S&P Global Ratings, categorizing it as below investment grade. This caution has led to a lack of interest in the Lancaster project, as noted by a senior executive at a major specialty lender who stated, "We saw it. We passed." Despite these challenges, a spokesperson for Blue Owl emphasized that third-party financing was considered, as is common practice for most transactions. They reassured stakeholders that the project is currently under construction and remains fully funded, on schedule, and within budget. However, it remains unclear whether Blue Owl is financing the construction solely through its own resources. Should Blue Owl be unable to raise the necessary debt, it could face significant financial obligations for the data center's construction. This situation illustrates the complexities and risks involved in funding extensive infrastructure for AI computing. Brennan Hawken, an equity analyst at BMO Capital Markets, expressed concern about the challenges in securing debt, indicating that it raises potential red flags worth investigating further. Recent reports highlighted difficulties faced by major banks in selling off portions of $38 billion in debt intended to finance construction for Oracle's data center campuses, underscoring the growing apprehension in the lending market regarding substantial AI investments and their potential impact on credit ratings. To alleviate these concerns, Oracle has announced plans to raise up to $50 billion through stock and bond offerings to maintain a robust investment-grade balance sheet. In an earlier announcement, CoreWeave indicated plans to lease an initial capacity of 100 megawatts at the Lancaster facility, with potential expansions to 300 megawatts. The company is also committed to investing up to $6 billion in the project to enhance its cloud infrastructure with advanced chips. In August, Chirisa Technology Parks revealed a partnership with Blue Owl and Machine Investment Group, pledging an additional $4 billion in funding for the development of the data center. Blue Owl has a track record of innovative financial strategies within the data center sector. Last year, the firm partnered with Meta to create a large data center campus in Louisiana, leveraging Meta's strong credit to secure $27.3 billion in investment-grade corporate bonds for the project. As it navigates the financing landscape for the Lancaster facility, Blue Owl may explore similar avenues, potentially tapping into the credit of CoreWeave’s larger customers or institutional investors to raise capital for construction.