Data center developer DuPont Fabros Technology (DFT) said today that it has arranged a $150 million loan that will allow it to finish its huge ACC5 data center in Ashburn, Virginia, where it has leased additional space. The company also plans to sell $550 million in notes to build a huge data center project in New Jersey and repay existing debt.
If successful, the debt sale would allow DuPont Fabros to bring new space online in the active New Jersey market without having to sell common stock. Management has expressed a preference to fund construction through debt rather than an equity offering that would dilute the holdings of current stockholders. The company's confidence in its ability to find buyers for its debt may have been boosted by the successful sale of more than $400 million in debt by Terremark Worldwide earlier this year.
Leasing Remains Strong
DuPont Fabros' effort to fund its growth has been boosted by the strong leasing activity in its core northern Virginia market. the company has now leased nearly two thirds of the ACC5 data center, where Net2EZ and Facebook have leased space. Today the company announced two new leases at ACC5, with one tenant signing a five-year lease for 1.138 megawatts (MW) of critical load , and another signing a 12-year deal for 2.275 MW.
Here's an overview of the financial transactions DuPont Fabros announced today:
- The company closed on a $150 million secured loan with a syndicate of lenders led by TD Bank. The loan, which is is secured by the ACC5 data center, has a five-year term at a floating rate of LIBOR plus 4.25% with a LIBOR floor of 1.50%. DuPont Fabros will use $25 million to repay a previous term loan secured by ACC5. DuPont Fabros will use the balance of the funds to complete construction on Phase II of ACC5, and set aside $10 million in reserve.
- The new loan includes an "accordion" feature that allows new lenders to join the existing bank syndicate to increase the amount of the loan up to an additional $100 million if certain leasing and other covenants have been met. DuPont Fabros previously used an accordion feature to restructure loans used to build its Chicago data center.
- DuPont Fabros also today announced that a subsidiary will offer $550 million in senior notes due 2017, a move designed to allow the company to complete construction on a planned 360,000 square foot data center complex in Piscataway, New Jersey, which was postponed last year. Company executives said recently that it would take approximately $75 million to restart construction in new Jersey and complete the project's first phase. DFT will use the remaining funds from the note sale to repay $50 million that it borrowed to build its ACC4 data center, and pay off a loan for a planned project in Santa Clara, Calif., which is currently mothballed.
"We are pleased to have secured this loan in a challenging credit environment," said Hossein Fateh, President and CEO of DuPont Fabros Technology. "This loan will allow us to continue to make progress on our development pipeline by completing Phase II of ACC5. We now expect that ACC5 Phase II will be placed in service in October 2010."