Can the customer keep the GPUs running if the provider fails?
Hyperscale customers ask for a way to keep their capacity if the provider becomes insolvent: a right to replace the provider as manager under the financing, or to have the contract moved to a substitute operator. The provider's lenders have to agree, so the wording sits between the customer contract and the loan.
Randeep Bubbra | Lawyer | Making the next generation of infrastructure financeable · Firm profile ·
What the filed contracts say
Contract
What the filed wording says
Nscale / Microsoft SOW
Nscale must ensure that its lenders and the colocation provider sign a side letter giving Microsoft the option to become the replacement manager on Nscale's insolvency.
IREN / Microsoft SOW
Good faith efforts only. Microsoft's option is to keep meeting the supplier's payment obligations under the financing or colocation agreement.
CoreWeave / OpenAI MSA
OpenAI picks a substitute operator; on CoreWeave's insolvency it may require the MSA, order forms and data centre agreement to be assigned to that operator within two business days.
The filed wording
Supplier shall ensure that concurrently with the closing of the applicable financing or colocation arrangements with any Third Party Operators (as defined below), Microsoft, Supplier and (i) any parties that have provided financing in relation to this SOW and (ii) the relevant colocation service provider (“Third Party Operators”) will enter into a side letter or other agreement (in form and substance satisfactory to Microsoft) which provides that, upon the occurrence of an Insolvency Event (as notified or determined by Microsoft) with respect to Supplier, such Third Party Operators will agree to give Microsoft the option to become the replacement “Manager” (or analogous term) under the financing documents or colocation services agreement (as applicable) and shall permit the services to be provided in accordance with the terms of this SOW so long as Microsoft continues to comply with its payment and other obligations thereunder. Microsoft will not have any obligation to exercise this option.
Each extract is quoted from the contract as filed with the SEC, checked against the filed text when it was added; “…” marks words left out. Filers redact commercial terms, so a [***] or [*] is the filer's, not ours. The summaries describe the wording, not how a court would read it, and each contract's defined terms and other clauses can change the effect. General information drawn from public filings. It is not legal advice on any transaction, and using this page does not create a lawyer-client relationship. Views are personal.
InfraCompute Weekly
The week in compute finance, read from the filings.
Deals, terms and the clauses behind them, for the people financing data centres, GPU clouds and the power behind them. By Randeep Bubbra.
