NextDC raises $790M in convertible notes, its third capital raise in four months
What's the deal? Australian data centre operator NextDC is raising A$1.1bn (about $790 million) through convertible notes to fund the continued expansion of its Australian sites. It is the company's third capital raise in a little over four months.
Round details: The notes mature on September 17, 2031, with holders able to put them back to the company in September 2029. The conversion price will be set at a 32.5% to 37.5% premium over a reference share price, floored at A$12.40.
NextDC will also enter capped call transactions, with an indicative cap around 70% above the reference price, to limit dilution if the notes convert. By issuing convertible debt rather than new shares, the company avoids selling equity at today's price.
Why now? NextDC's capital expenditure explains the need. It expects to spend between A$5.25bn and A$5.75bn in the 2027 financial year — roughly 55% to 70% more than the year before — on contracted capacity it still has to build, and build fast.
The fundraising history shows the same pressure. In April, NextDC announced an A$2.2bn capital plan, including a fully underwritten A$1.5bn entitlement offer and hybrid commitments from La Caisse. In May, it added A$1.8bn in senior debt, taking pro forma liquidity to about A$8.4bn.
At the same time, it contracted 250MW of new capacity, lifting its forward order book by 83%. Four months later, it is raising another A$1.1bn.
The size is notable: at roughly $790 million, the round ranks in the 96th percentile of post-IPO convertible raises in Australian telecom over the trailing 48 months.
What could go wrong? The debt still has to be repaid if expected growth does not arrive. If new capacity takes longer to generate revenue, the notes remain a liability regardless of the share price. The bigger constraint may be power: Australian data centres are expected to use seven times more electricity by 2036, and access to power and water are potential limits on wider expansion.
Investors were unfazed. NextDC shares closed 2.2% higher on the day of the announcement at A$12.79, appearing to read the raise as evidence that demand behind the expansion is real.
The signal: Convertible notes have become a common way for data centre companies to fund heavy upfront spending before new capacity earns revenue. NextDC is also competing with rivals for capital, construction and grid connections — Nvidia-backed Firmus has raised $505 million plus $10bn in Blackstone debt while preparing an ASX listing. For NextDC, financing is only half the plan; delivering the capacity on schedule will hinge on electricity.
Read more: thenextweb.com
Image credit: NeoSpire
