Nebius's $5.75B convertible puts construction risk on bondholders

Data center debt became its own asset class this week, as Nebius, the Nvidia-backed neocloud, closed one of the largest convertible bond offerings on record: a $5.75 billion raise earmarked for construction, build-out, and GPU procurement, according to Bisnow, which first reported the deal.

Nebius, an Amsterdam-based AI cloud provider, belongs to the growing class of neoclouds that operate specialized AI data centers and rent out high-performance computing for AI training and inference, with facilities in Finland, France, and the UK and U.S. projects underway in New Jersey, Pennsylvania, and Missouri. Alongside the raise, it agreed to swap $800 million of earlier bond offerings for roughly 16 million new shares, and said it would use the proceeds largely for data center expansion, construction-related spending, and GPU procurement.

The debt load is steep: the new raise brings Nebius's total convertible debt to $12 billion against $529.8 million in 2025 revenue, and Wall Street marked the stock down as much as 6% Monday on dilution concerns and the size of the borrowing.

Chief Communications Officer Tom Blackwell told Reuters that “we know that everything we build, we can sell several times over.” Nebius's expansion has already produced a marquee lease: Vantage landed the neocloud as the first tenant at its South Wales AI Growth Zone campus, as PRED reported. The company has also been borrowing on a steady cadence — $775 million in July and a $4 billion bond offering in March, the same month Nvidia invested $2 billion.

Atrium has mapped $1.3 trillion of U.S. data center development debt across county filings, CMBS trusts, and bank syndications, and six asset managers — Apollo, BlackRock, Blackstone, Brookfield, Goldman, and KKR — have signed a $500 billion memorandum of understanding with Nvidia to steer institutional capital into the build-out.

Institutional investors are allocating to data centers to own AI growth without taking tech equity risk, and the debt side is following: CMBS trusts are underwriting data center properties, private lenders are building construction loan books, and now a neocloud has gone to the global convertible market at this scale for the first time.

Most data center construction has been funded through bank construction loans, private credit funds, or corporate credit facilities; a public convertible gives Nebius access to a much larger pool of capital while subjecting it to mark-to-market pressure and dilution risk, and replaces the traditional real estate credit underwrite with a corporate one.

For real estate debt desks, the structure matters as much as the size: a convertible lacks the milestone-based draw schedule, lien priority, and covenant package a bank construction loan would carry, so bondholders are taking construction risk through a capital markets instrument and shifting the underwrite from a credit committee to a dealer and a rating agency.

A convertible is also a corporate obligation, not a mortgage: bondholders have a claim on Nebius, not on the individual data centers, which filters the real estate risk — construction delays, cost overruns, power failures — through the corporate credit rather than the asset. Lenders who want a direct claim on the physical asset still need a loan structure.

These are long-lived, capital-heavy assets — power hook-ups, cooling systems, concrete shells — and the construction-cost squeeze is the binding constraint: the sponsors who can source power and land at a reasonable price will be the ones who can service this debt. Nebius is betting its power and land deals in New Jersey, Pennsylvania, Missouri, and across Europe will hold up, and the capital markets are letting it make that bet at scale while the equity market expresses its doubts.

The arithmetic provides a second reason for doubt: Nebius is borrowing at roughly 23 times its 2025 revenue, and even a sub-market coupon on $12 billion of convertible debt produces an interest bill in the hundreds of millions of dollars — a line item that would consume a substantial share of $529.8 million in revenue.

The novelty is also a risk: there is no underwriting history for securitized convertible data center debt, and no seasoned comps for how these bonds price in a construction delay or a power curtailment. That argues for looking at the physical assets beneath the corporate paper.

The equity market's 6% markdown Monday is a fair warning for lenders. Nebius is assuming it can sell everything it builds several times over; if that holds, the securitized structure will be the template for data center finance, but if it does not, the loss sits with the bondholders and the construction lenders beneath them, not the equity.

The construction-cost squeeze will separate sponsors who can source power from those who can't; power is the scarce input, and Nvidia's own investment in the power-intermediation firm Cloverleaf is a bet on that same scarcity. Nebius is now on the funding side of that trade. The debt market has priced a future in which the build-out is worth far more than the interest, and the equity market marked the stock down 6% Monday.