If a neocloud tenant becomes insolvent, can its customer take over the data centre lease?
In Nscale’s lease of the Cedarvale campus, if the tenant becomes insolvent its anchor customer may, within 30 days, elect by notice to step into the lease and take over all of the tenant’s obligations for the rest of the term, provided it pays any rent then owing. The tenant may also transfer the lease without the landlord’s consent to its financiers in connection with financing for the lease and its anchor customer. A change of more than 50% of the equity or of control counts as a transfer. For a GPU cloud’s lenders and its customer, this is a ready-made way to keep the site if the GPU cloud fails.
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What the filed contracts say
Contract
What the filed wording says
Ionic Digital lease to Nscale
On the tenant’s insolvency, the anchor customer may elect within 30 days to step into the lease for the rest of the term.
Ionic Digital lease to Nscale
The customer must first pay any rent then owing.
Ionic Digital lease to Nscale
The tenant may transfer to its financiers for financing tied to the lease and its anchor customer, without landlord consent.
Ionic Digital lease to Nscale
A transfer of more than 50% of the equity, or of control, is a transfer needing consent.
The filed wording
For the avoidance of doubt, the cumulative transfer of any equity interest greater than 50% or any transfer of a controlling interest in Tenant and/or Tenant’s ownership (at any level) in one or a series of transactions, or as a merger or consolidation of Tenant with another legal entity, shall be deemed Transfers for purposes hereof. … (d) to its financiers in connection with any financial arrangements in connection with the Lease and Tenant’s anchor customer;
Ionic Digital net lease of its Cedarvale campus (Barstow, Texas) to Nscale, 234 MW plus 89 MW expansion, section 10.1(a), permitted transfers · Ionic Digital S-1, Exhibit 10.16
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.
