A Blackstone-led BX consortium is raising a roughly $5.5 billion ($3.7 billion) loan package to finance its $24 billion acquisition of AirTrunk, according to two people with direct knowledge of the matter, as the U.S. company expands its Asia commitment.
Blackstone said on Wednesday (link) that it has partnered with the Canadian Pension Plan Investment Board (CPP Investments) to buy AirTrunk, considered the largest hyperscale data center company in the Asia-Pacific region.
Investors have flocked to the sector (link) as artificial intelligence drives demand for capacity, and the financing package would be the second-largest acquisition loan in the region this year, according to Dealogic.
It includes a AUD 2 billion term loan and a AUD 3.5 billion revolving credit facility, according to the insiders, who could not be named due to private information.
Blackstone declined to comment.
More than 10 banks are involved in the loan syndicate, including Credit Agricole, Deutsche Bank, Morgan Stanley and Japan’s MUFG, according to insiders.
Credit Agricole, Deutsche Bank and MUFG declined to comment. Morgan Stanley did not respond to a Reuters request for comment.
The financing would cover up to 50 percent of Blackstone’s equity investment in the deal, one of the people said, while the total value of the deal includes AirTrunk’s debt and its capital expenditures on committed projects.
HIGH PRICE
The consortium’s purchase price would be more than 20 times AirTrunk’s forecast earnings before interest, taxes, depreciation and amortization (EBITDA), the insiders said.
The loan would appear highly leveraged in a typical acquisition, but lenders are taking into account AirTrunk’s estimated growth and cash flow over the next few years based on the contracts, the people familiar with the matter said.
AirTrunk raised about A$4.6 billion from more than 30 lenders last year, and that debt will roll over after the acquisition, people familiar with the matter said.
AirTrunk’s valuation increased during the sales process, which officially began in March, due to the increasing use of AI, which requires larger data center capacities.
CPP Investments said in a statement on Wednesday that it will hold a 12 percent stake in AirTrunk following completion of the transaction.
AirTrunk founder and CEO Robin Khuda will continue to lead the Sydney-based company and retain an undisclosed stake once the transaction is completed.
Khuda, 45, who came to Australia from Bangladesh at 18 to study accounting at the University of Technology in Sydney, has built the $24 billion data centre business in less than a decade. “Our path has never been easy, we have faced so much adversity and have always come out stronger and more resilient,” Khuda said in a post on LinkedIn. He has admitted he used his savings to save the company and considered bankruptcy. “It was Christmas 2016 and I had to deliver our first data centre by September 2017… we got to the point where we were running out of money. I even took money out of my superannuation fund, that was naughty of me,” he said at the Australian Financial Review Business Summit in March. “I even called my lawyer and said I needed bankruptcy advice.” His LinkedIn profile details his three-year stint at data centre operator NextDC 
NXT is listed as deputy CEO and executive director, but his role as CEO at mobile payments company Mint Wireless, which he left after six months, is not mentioned.
Blackstone Consortium Secures $5.5 Billion Loan for $24 Billion AirTrunk Acquisition
Table of Contents
In a significant financial maneuver, a consortium led by Blackstone, alongside the Canadian Pension Plan Investment Board (CPP Investments), is raising approximately $5.5 billion to finance its monumental acquisition of AirTrunk, the largest hyperscale data center operator in the Asia-Pacific region. This high-stakes deal, valued at around $24 billion, signals Blackstone’s strategic commitment to expanding its presence in Asia amidst surging demand for data capacity driven chiefly by advancements in artificial intelligence (AI).
Understanding the Loan Structure
The financing package includes an AUD 2 billion term loan and an AUD 3.5 billion revolving credit facility, as revealed by sources close to the deal who spoke on the condition of anonymity. This financing commitment is poised to cover nearly 50% of Blackstone’s equity investment in the acquisition, which, when combined with AirTrunk’s existing debt and its projected capital expenditures for ongoing projects, underscores the scale of this transaction.
Implications for the Loan Market
This loan package is set to be the second-largest acquisition loan in the Asia-Pacific region for the year, according to Dealogic. With over 10 major banks, including prominent names like Credit Agricole, Deutsche Bank, Morgan Stanley, and Japan’s MUFG, participating in the loan syndicate, the financing highlights the strong interest from financial institutions in the data center domain, bolstered by AI’s exponential growth trajectory.
Valuation and Growth Potential
The consortium’s decision to pay a price that exceeds 20 times AirTrunk’s forecast earnings before interest, taxes, depreciation, and amortization (EBITDA) illustrates the high stakes involved. While the loan may seem highly leveraged by typical acquisition standards, lenders are optimistic about AirTrunk’s estimated growth and robust cash flow projections based on existing contracts. This sentiment reflects a growing recognition of the strategic necessity for enhanced data center capacity in the AI economy.
The Role of AirTrunk and Its Leadership
AirTrunk, founded by Robin Khuda, has seen significant growth, previously raising about A$4.6 billion from a diverse range of lenders last year. Following the acquisition, CPP Investments intends to hold a 12% stake in AirTrunk. Khuda, who has played a pivotal role in building the company from the ground up since migrating from Bangladesh at the age of 18, will continue to lead the organization post-acquisition, ensuring stability and continuity.
In his own words, Khuda has navigated a tumultuous path towards success. He embodies resilience, having faced significant challenges, including considering bankruptcy in 2016, when he used his savings to keep the company afloat. His leadership will be crucial as AirTrunk transitions into this new phase with its substantial backing.
The Growing Importance of Data Centers
The demand for data centers has skyrocketed, particularly due to the accelerating pace of technological advancements in AI. Organizations across various sectors are increasingly relying on data-driven solutions, leading to a need for robust infrastructures to support these operations. The increasing dependency on cloud computing, big data analytics, and machine learning frameworks positions firms like AirTrunk at the forefront of the data processing revolution.
Future Prospects of the Acquisition
As the acquisition proceeds, the implications for AirTrunk and its stakeholders look promising. Analysts predict a strengthening of AirTrunk’s position in the competitive data center market. The financial resources available through the Blackstone-led consortium are expected to enhance operational capabilities and service offerings, providing a competitive edge amidst other market players.
Conclusion
The Blackstone-led consortium’s ambitious acquisition of AirTrunk not only signifies an essential investment in the Asia-Pacific region’s data center market but also underscores the transformative effects of AI on operational demands. As financial giants rally to support this groundbreaking transaction, the focus remains on leveraging the significant growth potential within the data center industry.
For investors, the landscape is continuously evolving, and understanding these dynamics is crucial for future investment strategies.
Keywords:
Blackstone, AirTrunk acquisition, data center, CPP Investments, artificial intelligence, loan package, investment, Asia-Pacific data centers, financial institutions, technology infrastructure.
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