Hyperscaler lease-backed project bonds

Trace the promise to its beneficiary

Begin with the legal tenant, any guarantor and the obligation covered by support. Rent, termination amounts, power charges and debt service are separate promises. Identify who may claim, when payment is due and the relevant cap. Avoid moving a guarantee across entities simply because it appears in the same project announcement.

Examine the delivery interface

Before acceptance, project completion and customer payment obligations may not align. Compare construction milestones, longstop dates, fit-out requirements and service tests with draw conditions. Determine who pays interest, operating costs and overrun amounts while customer billing has not begun. A long lease term does not fund a delayed start by itself.

Match contractual cash to the bond schedule

Model lease collections against bond principal, interest, reserves and essential operating costs by period. Separate indexation and power pass-through from fixed rent. Examine expiry, renewal and termination assumptions. A contracted revenue total is not cash available for debt service and should not be used as a simple coverage multiple.

Read a disclosed example narrowly

The River Bend filing separates lease-related support from the project notes and states that the notes are not guaranteed by the parent, tenant or lease guarantor. The existing interactive credit-support case maps that distinction. The lesson is to follow the obligation and beneficiary, rather than infer noteholder recourse from a recognisable corporate name.

The structure

1. Issuer. A ring-fenced company owns the campus, its leases and its accounts.
2. Leases. Typically triple-net, 10 to 15 years, with one tenant or a small group.
3. Security. Land, buildings, equipment, the leases, accounts and the shares in the issuer.
4. Construction support. The sponsor gives a completion guarantee until the buildings are delivered and rent starts.
5. Reserves. A debt service reserve funded at closing, sometimes sized to cover interest during construction.
6. Cash management. A waterfall, with sweeps or scheduled amortisation.
7. Offering. Usually Rule 144A, high yield or investment grade depending on the tenant.

The pricing ladder: 2025-26 public deals

Source: issuer indentures and filings listed below; Meta pricing from public reporting. Sizes are at issue.

Three patterns are visible:

• Tenant credit drives price. The same sponsor, Applied Digital, priced at 9.25% with CoreWeave as tenant and 6.75% with Oracle.
• Backstops narrow the gap. Google-backstopped Fluidstack leases priced between the CoreWeave and Oracle deals.
• Longer, amortising debt needs investment-grade support. Hut 8 and Meta Hyperion, with the strongest credit support, raised long-dated amortising debt; the high-yield deals are around five years.

Key terms in the indentures

Cash sweeps and amortisation. The Google-backstopped bonds (TeraWulf, Cipher, Flash Compute) sweep 50% of excess cash flow. Core Scientific's notes repay in instalments of 11.5% a year of original principal.

Lease termination redemption. If a tenant pays a termination fee, bondholders expect it to repay the notes. Applied Digital's Polaris Forge 2 indenture includes a "Datacenter Lease Termination Fee Mandatory Redemption".

Add-on debt. Indentures allow more notes for new buildings, subject to limits. Flash Compute caps add-on debt at 70% loan-to-cost; Core Scientific at 85%.

Reserves. Debt service reserves are large at closing because there is no rent yet. TeraWulf's indenture sets the required amount at US$447m on the issue date, then, during construction, US$265m plus the next two scheduled interest payments, less interest already paid. Cipher's deal follows a similar pattern (US$210m at issue, US$110m base amount).

Completion support. Every high-yield deal in the table relies on sponsor completion guarantees until rent starts, because investors are funding buildings that are not yet built.

How this compares with other options