eStruxture secures $1.35-billion in debt financing to build Canadian data-centre business

Canada’s largest homegrown data-centre builder has nearly doubled its borrowing capacity and scored an investment-grade credit rating for its first public debt offerings.

Montreal-based eStruxture Data Centers, which owns 14 data centres in Toronto, Montreal, Vancouver and Calgary and has two more in development, said Wednesday it had raised $750-million for the first data-centre securitization to be both covered by rating agencies and backed by Canadian assets only. That consists of two sets of $150-million five-year notes and a third at $450-million. DBRS rated the notes at BBB with a stable trend.

EStruxture is also replacing a $750-million bank facility backed by National Bank of Canada, Bank of Nova Scotia, Bank of Montreal and Deutsche Bank with a $600-million facility backed by just National and Scotiabank, which were bookrunners on the deal.

Over all, its borrowing capacity has grown to $1.35-billion. But more fundamentally, it signals eStruxture’s transformation into a seasoned owner and builder of infrastructure assets, giving it access to the bond market to backstop its growth.

Bell to open six data centres equipped to power AI models and apps in B.C.

The company will now tap its banks to fund construction of new centres – which cost more than $500-million apiece – then issue bonds to finance their payback after they go into service, saving it more than 100 basis points in annual borrowing costs. The notes will be issued under eStruxture’s new “green finance framework” to appeal to investors looking to back companies committed to limiting their climate-change impact.

The notes are priced at 290 basis points above five-year Government of Canada bonds, the smallest spread of any Canadian data-centre issuance to date.

“This brings down our cost of capital, but more importantly, it opens a perpetual financing vehicle to finance the material growth we have on the horizon,” Taylor Hammond, head of corporate development and capital markets with eStruxture, said in an interview. “The investment-grade rating is a stamp of approval that our customers, vendors and partners can rely on us.”

The deal “demonstrates the successful evolution of data center securitization, enabling the sector’s continued global build-out of critical digital infrastructure,” Matt Bissonette, senior managing director of Guggenheim Securities, which acted as lead structuring adviser, said in a release.

EStruxture was founded in 2017 by Florida-based chief executive officer Todd Coleman after he sold his previous data-centre company, Cologix Inc. He felt Canada was an ideal place for data centres to serve a growing market fuelled by remote work, online trading, video streaming, 5G technology, artificial intelligence and other online activities. Energy was cheaper here, and the colder climate provided a more economical way to reduce the temperature in buildings containing racks of heat-generating servers.

At the time, data were commonly stored in the U.S., but he suspected that would change. Subsequent geopolitical shifts proved him right, as did growing concerns over where data were stored, overreliance on U.S. tech giants for AI and cloud computing, and the strength of the U.S. dollar.

The boom in generative AI has increased demand for energy-hungry data centres. The Canadian government has been concerned that the country does not have enough of this infrastructure and increasingly sees domestic data-centre capacity, to ensure sensitive data stay within the country’s borders, as a national- and economic-security issue.

Last year it launched a $2-billion program to help Canadian companies access computer chips used to build and run AI models, and encouraged the private sector to build more facilities domestically. BCE Inc. and Telus Corp. have announced AI data-centre projects, and the Alberta government is trying to attract companies to build in the province.

Alberta has a big vision to build massive AI data centres, but do they have the power to handle it?

EStruxture was ahead of the curve, building a centre in Calgary that will cost $750-million.

The company bought most of its centres from Shaw, Gaz Metro Plus and Aptum Technologies, and transformed the Montreal Gazette’s defunct printing plant into a data centre. It has almost 1,000 customers in Canada and dozens of other countries, including hyperscaling tech giants, movie studios, telecom companies and others with business in Canada.

EStruxture was backed early on by the Caisse de dépôt et placement du Québec, which sold its stake last year to a consortium led by Toronto’s Fengate Asset Management in a $1.8-billion recapitalization deal.

The company’s bonds will be serviced by contract payments from 390 customers at six data centres. DBRS said in a release that its rating was underpinned by stable projected cash flow from a diverse set of loyal clients across the country and the “expected resiliency and sticky nature” of revenue streams given “the critical and strategic nature of services that data centres provide to tenants’ business operations.”