Dupont Fabros (DFT), which builds and operates datacenters as a REIT, has suspended construction at both its NJ-1 (Piscataway NJ) and ACC-5 (Ashburn VA) sites. This follows the news of three weeks ago that their Santa Clara project had been suspended. The company had just raised $100M but had needed far more than that to continue in Santa Clara. Well, apparently they need more to finish in New Jersey and Virginia as well, because this news effectively suspends their construction across the board.
Looking at the numbers, it is clear that Dupont Fabros cannot expand without access to the credit markets, their cash balance just can’t support it. And with the maturity of a mortgage on their new Chicago facility maturing in late 2009 to the tune of $120M, clearly they decided that discretion is the better part of valor. One has to assume that this situation is temporary, the datacenter sector is just screaming along and actually needs these facilities to meet demand. The suspension is an entirely artificial situation that will eventually work itself out one way or another. But in the short term competitors who are also building out space may benefit with improved pricing and uptake rates.
Now, DuPont Fabros is profitable and affiliated with the DuPont family. Clearly there are interested deep pockets, does anyone really think that maturities of a mere $150M are going to take them down? If Level 3 can pull off a $400M refinance, surely these guys can manage a smaller one in a less difficult situation. They were obviously caught by surprise by the instant deep freeze in the credit markets, but I don’t think their survival is in doubt. I suppose the only question is, how much dilution will common shareholders face? Given that insiders have been going on a buying spree in the past few weeks, apparently they aren’t too worried.
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