Galaxy Locks In 9.875% Rate on $3.5B AI Data Center Bond Sale

Galaxy Digital Inc. will pay nearly 10% interest on $3.51 billion of secured debt financing for the expansion of its Helios data-center campus in Texas, highlighting the steep cost of funding the company’s push into AI infrastructure.

The senior secured notes, issued through its Galaxy Helios Data Centers II subsidiary, carry a 9.875% annual coupon and mature on Aug. 1, 2031. The transaction is expected to close July 28, subject to customary conditions, Galaxy said in a statement late Thursday.

At the original principal amount, the coupon translates into about $346 million of annual cash interest, paid twice yearly. That is roughly 82% of the $424 million in 2028 net operating income that Galaxy projected for the development in an earlier investor presentation.

The comparison underscores how much of the project’s early operating income may be absorbed by financing costs. The notes also amortize at 4% of their original principal annually, equivalent to about $140 million, although those principal payments will not start until at least 10 months after the project is completed.

Interest and scheduled amortization would therefore initially total about $486 million a year if the full principal remained outstanding. That simple calculation is not directly comparable with a single year of projected operating income because the principal balance will decline, rent is scheduled to escalate and Galaxy is using some of the proceeds to establish debt-service reserves.

Still, the 9.875% coupon represents a substantial premium to government borrowing costs. The five-year US Treasury yield was about 4.4% shortly before the pricing, implying a spread of roughly 5.5 percentage points. That premium reflects construction and completion risk, dependence on a single tenant and the project-specific nature of the financing, even though the debt is secured by first-priority liens over substantially all the issuer’s and guarantor’s assets.

The rate is also far above the coupons on Galaxy’s outstanding exchangeable debt, which range from 0.5% to 3%. Those securities are an imperfect comparison because their exchange features give investors potential equity upside, allowing Galaxy to borrow at lower cash interest rates. The new notes are conventional project debt and are not exchangeable into shares.

Galaxy plans to use the proceeds to fund part of the construction of two buildings containing eight data halls on a roughly 260-acre property in Dickens County. The development will have 400 megawatts of utility capacity and 260 megawatts of critical information-technology capacity.

The project, known as Helios Phase II, is leased to CoreWeave (NASDAQ: CRWV) Inc. under a 15-year initial agreement. Galaxy has disclosed $10.4 billion of minimum contracted lease payments and expects rent to begin in the second quarter of 2027. The lease includes annual increases of between 3% and 5%, depending on inflation.

The long-term CoreWeave contract provides a source of revenue against the debt, but it also concentrates the project’s credit exposure in one customer. CoreWeave is itself spending heavily to build computing capacity and has relied extensively on debt and other outside capital to finance its expansion.

The bond sale is considerably larger than the $1.4 billion project-financing facility Galaxy secured in 2025 for the first phase of Helios. Galaxy’s expansion of the former bitcoin-mining site into an AI-computing campus has become a central part of its effort to diversify beyond its digital-asset businesses.

Galaxy shares gained about 5.1% Wednesday, when the offering and project forecasts were disclosed, before falling about 1.9% Thursday as the debt was priced.