Apparently the thawing in the credit markets has now calved an iceberg or two. Yesterday, Equinix (NASDAQ:EQIX, news, filings) announced they would sell $250M in convertible debt, and just twenty four hours later have raised that to $325M at 4.75% at a strike price of $84.32. I wouldn’t call it cheap money, at least not relative to a few years ago, but it isn’t bad. Equinix will use the cash to expand its footprint to meet demand, but didn’t give any details yet. Interestingly, they also entered into a capped call arrangement designed to reduce dilution, something vaguely similar to the bond hedge Level 3 had with Merril Lynch.
And now today, Terremark (news, filings) [a subsidiary of Verizon (NYSE:VZ, news, filings)] has announced its own $400M offering of senior secured notes. Part of it will be used to refinance an existing note, and the rest will be available for its own expansion. The terms are not yet known, but since it doesn’t appear to be a convert I will be curious to see the interest rate. I wonder if they will see demand similar to that Equinix saw.
I have always thought that when the credit markets opened, it would be the datacenters that got the money first. That’s because they need the money. Well, not because they need the money, but they actually have real, viable, solid assets to invest the money in. Data centers are assets that the market understands, they provide services for which demand is steady and growing and whose pricing is stable or better. Other companies who have a harder, longer term case for profits probably can’t raise that much cash yet. But it’s a whole lot better than it was 6 months ago.
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