A closed Caldrion loan, shown under its project code name. The borrower and sponsor are not named. Terms are as of closing; returns are our underwriting targets, not realized results.
Contract and equipment financing · $32.0M · 55% LTC · S+750
At a glance
| Borrower | SPV of a Texas-based AI infrastructure operator (a neocloud) |
| Collateral | 1,024 latest-generation data-center GPUs (128 liquid-cooled eight-GPU servers) plus networking and storage; assignment of a 36-month take-or-pay compute contract; assignment of the colocation and power agreements |
| Installed cost | $58.0M |
| Loan | $32.0M |
| Leverage | 55% LTC; about 65% of appraised fair market value |
| Term | 36 months, fully amortizing, matched to the contract |
| Pricing | S+750 (≈11.25%); 2.00% origination |
The situation
The operator signed a 36-month take-or-pay contract with an investment-grade enterprise software company, which reserved the whole cluster at $2.10 per GPU-hour. The operator had to buy and install the hardware before the contract started. Banks won’t lend against GPUs because they lose value quickly, and the operator’s equity was committed elsewhere.
Annual cash flow
| Annual cash flow | $M |
|---|---|
| Contract revenue (1,024 GPUs × 8,760 hours × $2.10) | 18.8 |
| Colocation | (1.8) |
| Power (about 1.25 MW at $0.068 per kWh) | (0.75) |
| Operations, insurance and support | (1.15) |
| Cash flow available for debt | 15.1 |
| Caldrion debt service (fully amortizing) | (12.6) |
| Debt service coverage | 1.20x |
Collateral against loan balance
| Assuming a 30% annual decline in hardware value | Loan balance | Hardware value | LTV |
|---|---|---|---|
| Close | $32.0M | $49.3M | 65% |
| Month 12 | $22.5M | $34.5M | 65% |
| Month 24 | $11.9M | $24.2M | 49% |
| Month 36 | $0 | $16.9M | 0% |
Even at a harsher 50% annual decline, the hardware would still cover the loan at month 12.
Structure
- The SPV owns the hardware. The contract, colocation lease and power agreement are all assigned to Caldrion, with each counterparty’s consent.
- The customer pays directly into an account we control. Cash is applied in order: colocation and power, then debt service, then reserves, then a 50% sweep to prepay the loan, with the rest going to the sponsor.
- Contract terms we required: the customer can terminate for convenience only by paying at least the outstanding loan balance; service-level credits are capped at 10% of monthly fees; and there is no setoff against the operator’s other obligations.
- The colocation provider gave us step-in rights and agreed not to disturb the equipment, so we can keep the cluster running or remove it.
- A debt service reserve holds 3 months of payments.
- The hardware is scheduled by serial number, manufacturer warranties are assigned, and it is insured at full replacement cost with a pool of spares.
- Our digital assets team helped diligence the operator’s high-density infrastructure.
Risks and mitigants
| Risk | Mitigant |
|---|---|
| Obsolescence and resale value | The loan is repaid in full during the contract, with no reliance on resale value |
| Customer terminates or defaults | Investment-grade customer; termination payment at least equal to the loan balance |
| Uptime failures | Tier III facility; credits capped; 5% revenue leakage modeled |
| Power or colocation disruption | Step-in and non-disturbance rights; business-interruption insurance |
| The operator fails | SPV structure; backup operator identified; the hardware can be removed |
Exit and returns, as underwritten
The contract repays the loan, and with the 50% excess-cash sweep, payoff comes around month 33. The sponsor keeps the hardware’s remaining value and any contract renewal. Target: about a 12.5% IRR. The loan sat at the edge of our criteria and drew the hardest scrutiny from our investment committee.
See all our transactions, the twelve loans compared and our criteria.
This case study is provided for information only. It is not an offer of securities or investment advice, and targeted results do not indicate future results.