Switch is borrowing $500 million to pay for its recent acquisition of Texas colocation provider Data Foundry.
The Vegas-based colocation provider has made a private offering of $500 million in "senior notes" through its subsidiary Switch Ltd. Senior notes are a type of bond that takes precedence over other debts, if the the company should ever declare bankruptcy and be forced into liquidation.
Senior notes carry less risk and normally pay lower rates of interest than junior notes. Switch Ltd is seeking $500 million .for its 4.125 percent senior unsecured notes due 2029.
The company said the loan is to fund the acquisition of Data Foundry. Last month Switch announced it is buying Data Foundry for $420 million, giving it four multi-tenant data centers; three on an Austin campus and one in Houston. The deal is expected to close around the middle of 2021.
Switch said the remaining net proceeds will be used ‘for general corporate purposes.’
Data center companies are increasingly able to secure large loans and bonds. Canadian data center company eStruxture recently raised CAN$600 million (US$487m) in a mixture of equity financing and credit to pay for its Aptum acquisition, while earlier this week Italian telco TIM secured a €350 million loan from the European Investment Bank to fund a fiber and data center expansion drive.