The Dallas-based data center provider Aligned recently completed a $1 billion senior secured credit facility that it claims is one of the largest private debt raises in this sector’s history, and the first of its kind that links financing to sustainability.
In addition to the lower interest rates, the sustainability-linked aspect of the financing is closely tied to the needs of Aligned’s customers, explains Andrew Schaap, Aligned’s CEO, in an email response to BD+C’s questions.
“Having an operator that is a good steward of the environment, [and] who offers sustainable options for power, cooling and growth, is table stakes,” says Schaap. “When it comes to investors, sustainability-linked loans are among, if not the, industry’s fastest growing subset(s). With accelerated digital transformation and technology use, the industry has seen unprecedented investor demand. With this being the first-ever financing deal of its kind for a data center company in the U.S., investors are seeing an attractive return on investment, coupled with a powerful and unprecedented impact on championing sustainability in this space.”
PUTTING ITS MONEY WHERE ITS MOUTH IS
Aligned’s sustainability-linked financing is tied to the Company’s core environmental, social and governance (ESG) objectives, and Key Performance Indicators (KPIs), including:
Renewable Energy: A commitment to match 100% of Aligned’s annual energy consumption to zero-carbon renewable energy by 2024.
Sustainability Reporting: Transparency and continuous improvement across sustainability best practices. This target aligns the Company’s ESG reporting efforts with a leading global standard, maximizing consistency in ESG disclosure for Aligned stakeholders.
Workplace Safety: A commitment to having / reporting on an industry-leading Total Recordable Incident Rate (TRIR).
“Essentially, it means Aligned is putting our money where our mouth is,” says Anubhav Raj, Aligned’s CFO. “If we deliver on our commitments, we benefit from discounted interest rates; if we don’t, the rates either stay the same or go up (depending on the actual performance).”
Raj adds that, from a lender/investor perspective, given that the interest-rate reduction requirements are transparent, although investors would receive lower interest rate payments, they can place them in a sustainability bucket, “which can have different return thresholds.”
The credit facility consists of a $650 million term loan, a $100 million delayed draw term loan, and a $250 million revolving credit facility. Aligned engaged TD Securities as the administrative and collateral agent; Goldman Sachs Lending Partners LLC as the syndication agent; and ING Capital LLC as the sustainability structuring agent. TD Securities, Goldman Sachs Bank USA, Citizens Bank, N.A., Deutsche Bank AG, New York Branch, and Nomura Securities International, served as joint bookrunners and joint lead arrangers for the facility.
Aligned's innovative cooling technology, the Delta 3.
PROCEEDS TO BE USED TO REFINANCE DEBT, DELIVER CONTRACTS
Schaap notes that ING created the sustainability linked loan concept in 2017. As Aligned’s sustainability structuring manager, ING was instrumental in helping the company structure the sustainability components of financing, and advising on ESG performance targets that would be viewed as industry-leading.
“Between Macquarie, ING, and several other Aligned capital partners, our investors are among the industry’s leading lenders when it comes to sustainability and sustainability-linked financing,” says Schaap.
Aligned is a private company, and does not disclose specifics about how it would use this credit facility. Raj did confide that Aligned plans to leverage the bulk of the financing—about $$750 million—to refinance existing debt and deliver on current contracts. The rest will be used for further expansion, both stateside and abroad. The term of the facility, inclusive of extension options, is five years.