DayOne In Talks With Banks for Potential $500 Million Bond

DayOne Data Centers Ltd. has been in preliminary talks for weeks with banks about a potential $500 million bond offering, according to people familiar with the matter, even as the Singapore-based company plans to list in the US.

The data center operator intends to push on with the discussions despite one of its project partners, Nvidia Corp.-backed Firmus Grid Ltd., dropping an initial public offering plan in Australia this week, said the people who asked not to be identified discussing private information. DayOne filed for a US IPO earlier this week and has been considering to raise around $5 billion.

Proceeds from the planned bond sale would be used for project financing, the people said. There were no details on which project or projects the money would be for. Citigroup Inc. is the lead arranger for the deal and DayOne could go to the market as early as next year, the people said.

Representatives for DayOne and Citigroup declined to comment.

DayOne joins an increasing number of companies that are part of the broad artificial intelligence buildout with plans to tap the debt market, banking on surging demand. But the failure of Firmus’ share sale attempt, in what would have been one of Australia’s largest IPOs, shows how global investors are starting to push back against what they see are frothy AI valuations.

The proceeds from Firmus’ listing would have funded purchases of graphics processing units for its first data center project in Batam, Indonesia, that it’s developing with DayOne as part of an eight-year partnership with Nvidia.

Firmus is now exploring raising up to $3 billion in a private funding round, Bloomberg News reported, citing people familiar with the matter.

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AI-related data center spending could reach $2.9 trillion between 2025 and 2028, with around half requiring external financing, which is driving debt issuance, according to Morgan Stanley.

If DayOne taps the bond market, it would be among the first data center firms in Asia Pacific to do so and would help others in the business to draw on larger pools of capital beyond bank financing.

Ahead of its planned bond offering, DayOne has closed half of a $7 billion-equivalent loan — one of the largest AI-linked borrowings in Asia — with more than 30 lenders participating. The upsized part of the loan, valued at $3.7 billion-equivalent, was split into a 5.5 billion ringgit ($1.3 billion) tranche and a $2.4 billion portion.

DayOne has also been seeking a HK$1.86 billion ($237 million) loan for a Hong Kong data center. In August, the company obtained a four-year S$530 million ($414 million) to develop its first buildout in Singapore.

Other companies in the region have been aggressively raising money from the debt market to fund their AI ambitions. Billionaire Masayoshi Son’s SoftBank Group Corp. last month raised the equivalent of $11.1 billion in one of the largest corporate junk-bond offerings on record.

Once an international affiliate of Chinese data center operator GDS Holdings Ltd., DayOne was previously known as GDS International before rebranding last year. It has brought in international investors, including SoftBank Vision Fund, Coatue Management and Ken Griffin and closed a $4.5 billion Series C funding round in June.

Apart from Indonesia, the company is operating or developing data centers in Singapore, Malaysia, Japan, Hong Kong, Thailand and Finland, according to the company’s website.