Transaction is the First Under the Industry’s Most Comprehensive Green Finance Framework
Flexential, a leading provider of data center colocation, cloud and connectivity, today completed the largest single asset-backed securities (ABS) issuance to date in the data center industry, including the largest-ever green data center ABS financing, to support rapid growth and development. The company issued the green notes under its new Green Finance Framework, which sets a new standard for green eligibility in the data center industry.
Setting a new industry benchmark, the offering dramatically improves the company’s investment grade credit profile, lowers the cost of capital, and allows Flexential to deploy greater data center capacity to meet accelerating demands in new and existing markets. Further details of the transaction include:
- A wholly owned subsidiary of Flexential issued $1.6 billion green ABS notes as part of a debut $2.1 billion entrance into the U.S. ABS market.
- Almost 90% of the notes were rated investment grade by Kroll Bond Rating Agency, including:
- $1.6 billion of term notes and $100 million of variable funding notes rated investment grade at A-
- $175 million of term notes rated investment grade at BBB
- $225 million of term notes rated BB, the largest non-investment grade issuance in the ABS market by a data center issuer
- Financing was split into $1.6 billion of notes with a 5-year anticipated repayment date, and $390 million of notes with a 7-year anticipated repayment date.
“The number of industry firsts in this transaction are a reflection of how we transparently and sustainably approach growth,” said Chris Downie, chief executive officer, Flexential. “We will leverage the capital generated by this transaction to deliver on our promise to support our customers’ evolving hybrid IT requirements. This inflection point is a result of considerable effort and tenacity from our employee base, along with the support from our investment partners and the entire Flexential ecosystem.”
Flexential’s Green Finance Framework and the green ABS demonstrate a market-leading commitment to aligning business growth and sustainability with transparency. The framework aligns to the core components of the International Capital Market Association (ICMA)’s Green Bond Principles, as well as the Green Loan Principles. These principles are voluntary guidelines to ensure consistency and transparency across the Green Bond and Green Loan markets globally, including requirements for the issuer to allocate an amount equal to the green ABS proceeds to support the financing or refinancing of Eligible Green Assets with clear and positive environmental impact.
The framework, which outlines the eligibility criteria for Green Assets, offers some of the most stringent requirements for data center infrastructure inclusion for both energy efficiency and water efficiency to date. For example, any new-build data centers funded through the offering must demonstrate a power usage effectiveness (PUE) of 1.4 or below, as well as zero water usage in cooling to be included under the framework. As an added commitment, Flexential will be reporting on the operational performance of the Green Assets on an ongoing basis.
Flexential also sought an external review of its Green Finance Framework from leading ESG data provider Sustainalytics, which confirmed the positive impact of the green program and relevance to Flexential’s sustainability strategy in its Second-Party Opinion.
“Our sustainability strategy focuses on where we can make the most impact by ensuring the entire lifecycle of Flexential’s facilities are designed, built and maintained with sustainability in mind,” said Garth Williams, chief financial officer, Flexential. “We will look to achieve this through energy- and water-efficient cooling, cleaner power systems, and renewable energy options. The level of detail contained within our new Green Finance Framework will ensure discipline in this strategy and our sustainability performance. We view these commitments as essential to maintaining our long-term competitive advantage in the marketplace.”
“With these new targets, Flexential is setting a new standard in efficiency and sustainability across the most material environmental issues for the industry,” said Dan Shurey, director, sustainable finance, Americas, ING. “By linking sustainability targets with a growth strategy, this financing demonstrates Flexential’s commitment to both their clients and the environment.”
Full details of the Green Finance Framework, as well as the external review by Sustainalytics, are available on Flexential’s website at www.flexential.com/greenfinance.
Guggenheim Securities, LLC acted as sole structuring advisor and joint active bookrunning manager for the securitized notes. J.P. Morgan, and Deutsche Bank Securities acted as joint active bookrunning managers. ING Financial Markets LLC was engaged as the Sole Sustainability Coordinator and passive bookrunner. Barclays, Citigroup, Jefferies, MUFG, and Truist Securities were engaged as co-managers for the transaction.
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