From junk bonds to leveraged loans, Terawulf (WULF.US) teams up with Morgan Stanley to open up a new path for AI infrastructure financing.

Note that the data center operator Terawulf (WULF.US) has just completed a landmark high-yield bond issuance and is currently exploring financing its AI infrastructure construction through the leveraged loan market. The company's CFO, Patrick Fuller, stated in an interview that the company is partnering with banks like Morgan Stanley to develop loan products. While TeraWulf's next financing is likely to be another high-yield bond, it "could also be a loan." About eight months ago, TeraWulf issued $3.2 billion in high-yield bonds to expand a data center in New York state, making it the largest junk bond issuance by Wall Street institutions in over thirty years (again led by Morgan Stanley). Technology companies are tapping into various corners of the credit market to meet unprecedented funding needs for AI, prompting Wall Street to design new debt structures to keep pace. Fuller stated, "TeraWulf and many of its peers are actively collaborating with banks to develop these types of products," "The infrastructure is basically ready, and the market is just waiting for more deals to establish precedents." This precedent emerged in late April when CoreWeave launched the first leverage loan supported by contracts from GPU clients such as OpenAI. This $3.1 billion loan attracted approximately $19 billion in investor orders. Fuller pointed out that connecting with loan investors also provides a pathway to enter the mortgage-backed bond market, the largest buyer of leveraged loans. "This opens up an important new source of capital for the industry," he said. The company, which is transitioning from Bitcoin mining, has been expanding its data center footprint, recently acquiring a high-performance computing development site in eastern Kentucky. "Given the capital required for building HPC infrastructure, expanding the available financing toolkit is an important step towards maturity for this industry," Fuller said. The $3.2 billion high-yield bonds issued in October of last year (the first such transaction for a cryptocurrency mining company) aimed to partially fund the expansion of a data center in the Barkana Lakeside Park in New York state. This deal attracted Alphabet Inc.'s parent company, Alphabet, providing a so-called "backstop support," attracting investor orders totaling over $11 billion. The tech giant will guarantee the debt once the facility is operational. Fuller stated, "As more deals enter the market, investors are becoming increasingly familiar with this asset class, and the financing terms are evolving," "I believe that as more issuers use this product, the leveraged loan market will also experience similar incremental development."