Banks try to offload $38B of AI data center debt they just underwrote
- JPMorgan, Morgan Stanley, SMBC and MUFG are exploring significant risk transfers that keep loans on their books while shifting the riskiest slice to outside investors, according to the Financial Times.
- A group of banks including JPMorgan and MUFG has spent more than six months trying to distribute $38 billion in construction debt for a Texas and Wisconsin data center leased to Oracle, per Bloomberg.
- Some lenders are willing to sell pieces of the Oracle-linked loan to non-bank buyers at a discount just to move it off their books.
- The banks are running into internal limits on how much AI-linked exposure a single lender can hold.
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Why would anyone want these? Data center GPUs can't really plug into a normal PC or server, so any resale would have to happen at the server or rack level.
Underwrite, then bundle, then sell. That's just what banks do. Same playbook as mortgage-backed securities in 2007, which is the part that worries me.
The article says banks don't sell down debt they're confident in, and that clashes with the 'totally normal' take. Both can't be true.
What's odd here is that syndications usually clear in a few weeks. This one has sat in distribution for six months and still isn't closed.
Morgan Stanley says AI debt raised $23B in September, less than half of August, but nobody says whether that's good or bad. Need the expected number to judge it.
Timing is the hard part. Everyone can see the warning signs, but that doesn't make it actionable. 2007 dragged on longer than most people expected.
This isn't private credit. It's large syndicated debt with a different risk profile, so don't lump the two together.
Depends on the price they offload at. Bundling in 2006 looked fine until prices turned.