KBRA assigns preliminary A- to up to $525 million US Signal ABS

KBRA assigned a preliminary A- rating to up to $525 million of notes US Signal plans to issue against ten of its owned data centers, according to Data Center Dynamics.

The ten colocation properties span 427,990 square feet and support about 22.5 MW of critical load. They generate $111.8 million of annualized recurring revenue and $63.8 million of annualized adjusted net operating income, or about $5.0 million of ARR per megawatt. The pool holds 839 customers. The largest is 9.7% of ARR, the top 20 about 40.8%, and the weighted average remaining contract term is 2.1 years before renewals.

KBRA applied a 12.0% stressed terminal capitalization rate to the pool, against a 10.5% to 11.5% range for other colocation ABS transactions it has rated. It cited "older assets in secondary and tertiary data center markets," with smaller tenant bases and "reduced asset liquidity relative to primary markets." For a buyer of the A- notes, that cap rate is the main input. A higher cap rate on the same income produces a lower stressed value, which against a fixed note balance leaves more room before losses reach the notes.

The issue splits three ways. $75 million of Variable Funding Notes carry an anticipated repayment date of November 2031 and a final maturity of November 2056. A $250 million fixed-rate tranche follows the same schedule. The final $200 million has an anticipated repayment date in November 2033 and the same 2056 final maturity. The fixed rates on the $250 million and $200 million tranches are to be determined.

Three Texas properties account for 13.6% of the pool's appraised value, two Chicago-market properties 6.9% and one New York property 2.5%.

US Signal acquired a Hillsboro data center with 4.5MW on site, as Private Infrastructure Daily previously reported. At the top of the range, $525 million of notes against $63.8 million of annualized adjusted net operating income works out to a debt yield of about 12%.