Offtake step-in rights and direct agreements in compute financing

The problem step-in rights solve

A GPU or data centre project depends on a small number of contracts: the customer contract that pays for capacity, the colocation agreement or lease that houses the servers, the power supply and, often, a managed services contract. If any one of them is terminated, the cash flow stops and the security over the hardware is worth far less.

An assignment of the borrower's rights is not enough on its own. The counterparty may not have agreed to it, may be able to terminate without telling the lender, and may not have to accept a substitute. Direct agreements close those gaps.

What a direct agreement usually contains

1. Consent to the security. The counterparty acknowledges the assignment of the contract to the lender's agent.
2. Notice before termination. The counterparty must tell the lender before terminating for the borrower's default.
3. Cure period. The lender gets extra time, on top of the borrower's own cure period, to fix the default.
4. Step-in. The lender (or its nominee) can take over the borrower's role for a period without assuming every past liability.
5. Novation. On enforcement, the lender can transfer the contract to a suitable new party.
6. Payments. The counterparty agrees to pay into the controlled account.

Real examples from public filings

IREN's Microsoft financing: three direct agreements. The Common Terms Agreement for IREN's Hardware 3 financing makes delivery of three direct agreements a condition to funding: a Customer Direct Agreement, a Colocation Direct Agreement and a Managed Services Direct Agreement. The customer version had to follow a form drafted by the customer's counsel and dated 23 January 2026, with changes allowed only if they were favourable to the lenders or did not materially prejudice them. That detail is a useful reminder that a strong customer often holds the pen on the direct agreement.

Nscale's Ward County facility: the "consent and agreement". Nscale's Microsoft-backed credit agreement defines the Customer Direct Agreement as a "Consent and Agreement" among the borrower, the collateral agent and the customer, to be signed on or before the first delayed draw funding date. US practice often uses "consent and agreement"; English law deals tend to say "direct agreement". The function is the same.

Customer step-in: IREN and Microsoft. IREN's statement of work with Microsoft includes a "Step-in right" clause. The supplier must use good faith efforts to procure that, when it closes any financing or colocation arrangement, Microsoft, the supplier, the financiers and the colocation provider sign a side letter. Under it, if the supplier becomes insolvent, Microsoft has the option to continue meeting the supplier's payment obligations under the financing documents or the colocation agreement, and the services keep running, as long as Microsoft keeps paying. Microsoft is not obliged to exercise the option. For lenders, this turns the customer from a risk into a possible source of continued payment.

Recognition agreements: Google, Fluidstack and Cipher. In September 2025 Cipher's Barber Lake subsidiary signed a recognition agreement with Fluidstack (the tenant) and Google. Google agreed to backstop certain of Fluidstack's lease obligations from the lease commencement date. If Fluidstack defaults on payment or becomes insolvent, and Cipher and Google have not agreed on a replacement tenant within a set period, Google may pay the rent due and assume the lease as tenant; in some circumstances pay a termination fee and receive an equity interest in the Cipher subsidiary; or in some circumstances defer that choice for a period. This is step-in by a credit-strong third party, and it is what allowed the related bond to price off Google's credit as well as Fluidstack's. See hyperscaler backstops and residual value guarantees.

Landlord consent: moving the lease into the borrower. On 30 March 2026, the date of CoreWeave's DDTL 4.0 credit agreement, CoreWeave assigned its lease of Building 3 at Applied Digital's Ellendale campus to CoreWeave Compute Acquisition Co. VIII, the DDTL 4.0 borrower, under an "Assignment, Assumption and Consent" signed by the landlord. Placing the data centre lease inside the borrowing SPV means the lenders' collateral covers the space the GPUs sit in, not just the GPUs and the customer contract. The landlord's consent is what makes that possible.

Points that get negotiated

• Length of the cure and step-in periods. Customers want short periods so that service failures are fixed quickly; lenders want enough time to find a new operator.
• Who can be a substitute. Customers usually require a replacement with similar technical capability and credit. Lenders want that test to be objective.
• Liability on step-in. Lenders resist taking on the borrower's past liabilities when they step in.
• Set-off. Lenders want the customer to waive or limit set-off against payments into the controlled account.
• Data and confidentiality. In compute deals the customer's data sits on the financed hardware. Expect strict rules on who can access the servers, which affects how lenders can enforce.