QTS data center under construction in Phoenix.
Blackstone Inc.–backed QTS drew about $12.5 billion of peak demand for a debut high-grade bond sale that will help fund a Microsoft Corp.–tied data center, according to people familiar with the matter.
Proceeds from the $4.6 billion offering will go toward refinancing credit facilities tied to a massive data center that QTS is developing in Fayetteville, Georgia, as well as other uses including payouts, according to Moody's Ratings. The project will house thousands of servers for companies such as Microsoft, which has signed on as a tenant.
The deal adds to a wave of borrowing for new artificial intelligence (AI) infrastructure. Hyperscalers have helped draw investors to billions of dollars of debt issued by data center developers by committing to long-term leases, lowering the perceived risk of project financing.
QTS's first public investment-grade note broadens the pool of investors it can tap for funding. The bond was issued by QTS Fayetteville I DC1-2 LLC and QTS TRS Fayetteville I DCI-2 LLC, subsidiaries of QualityTech LP. Moody's gave a first-time credit score of Baa2 to the offering—two notches above junk. The note will yield 1.375 percentage point over Treasuries, about 0.25 percentage point tighter than initial price talk, according to a person familiar with the matter.
In the past, QTS—which Blackstone purchased in 2021 for about $10 billion including debt—has tapped the U.S. private placement market, where bonds are typically bought by life insurers and asset managers. More recently, the firm raised $800 million in that format and plans to raise more, according to another person familiar with the firm's plans.
JPMorgan Chase & Co., which helped manage the sale, declined to comment. Wells Fargo & Co., SMBC Nikko Securities Inc., and Goldman Sachs Group Inc., which also participated in the offering, didn't immediately respond to a comment request. The deal was one of two offerings in the U.S. investment-grade primary market on Monday.
The boom in AI and the buildout of its infrastructure around it will require more than $3 trillion of financing, according to Moody's. Debt markets of all kinds are providing the bulk of that. Other high-grade bond sales tied to AI, including those from big tech firms such as Alphabet Inc., have driven record issuance and attracted strong demand.
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