Several recent U.S. data centre construction financings – each exceeding the billion-dollar mark and successfully syndicated – offer some insights for European arrangers, lenders (senior and mezzanine), and digital infrastructure sponsors. As Europe prepares for a new wave of hyperscale and AI-optimized data centres, these U.S. precedents provide a valuable blueprint for structuring, pricing, underwriting, and syndicating large-scale data centre construction and modernization loans.
Pricing Discipline with Flexibility
Without surprise, pricing of data centre financings is still a critical focus point for data centre operators and private equity sponsors looking to optimize their cash flow—particularly in the construction phases prior to the ready-for-service date when they might not yet receive payments from their hyperscalers and colocation tenants.
Overall, recent financings in the U.S. data centre market have shown that competitive pricing is still the norm, with hyperscale data centre financings interest rates as low as 250 bps (plus SOFR, zero floor) post-syndication. Colocation data centre financings also feature competitive rates (albeit slightly higher), with deals featuring spreads between 250 bps (plus SOFR, zero floor) and 350 bps (plus SOFR, 3.75% floor).
Interest rate cap arrangements for such financings continue to feature as a limit to the maximum interest rate payable on the loans, protecting both borrowers and lenders from the risk of rising interest rate. In addition, some hyperscale data centre financings introduced a reserve-based alternative i.e. with the borrower being able to opt for a less expensive interest rate cap set at a higher strike price, as long as it deposits the difference in expected interest cost into a reserve account held by a selected lender – with the reserve amount acting as a temporary synthetic cap, covering excess interest for the relevant periods if rates were to rise above the original interest rate cap.
Such structures may appeal to European sponsors seeking flexibility (and lenders requiring protections) amid volatile swap markets.
Strategic alliances with a focus on Power
As AI drives demand for new data centres and prompts the optimization of existing infrastructure and their use of energy, water and space, strategic alliances are appearing between various market players, with private equity sponsors, major real estate developers, data centre operators and energy providers joining forces. These joint venture arrangements are becoming prevalent in the U.S. data centre financing market, as they offer both sufficient capital contributions alongside external financings but also in-depth data centre construction, infrastructure and energy expertise, critical to the success of the project – with power supply and its reliability being a key consideration.
In this respect, U.S. and European power markets present distinct challenges and design imperatives for data centre developers and financiers. In the U.S., the very stringent data centre needs and their rapid expansion have been increasingly putting stress on the grid, with regional transmission constraints, aging infrastructure and increasing exposure to extreme weather events creating power outages and/or reliability risks. This has led to a surge in behind-the-meter solutions, including on-site gas turbine plants, as hyperscalers, data centre operators and sponsors seek reliable primary and back-up sources of power to meet their requirements. Recent U.S. data centre financings have included arrangements with local energy suppliers agreeing to build gas turbine plants, additional electrical stations and new transmission lines in exchange for the ongoing and future power supply being sourced solely from such suppliers – increasing power redundancy.
Similarly, while Europe has historically benefited from a more integrated and stable grid, particularly in Western Europe and the Nordics, it is not spared from reliability and instability concerns in light of the data centres’ fast expansion – and the recent April 2025 blackout across Spain, Portugal, and parts of France has raised questions about whether traditional backup systems are sufficient for ever-power hungry data centre infrastructures.
As a result, European lenders and sponsors may increasingly look to U.S.-style redundancy models and recent arrangements with power suppliers from the start to protect mission-critical infrastructure and optimize power distribution, energy consumption and redundancy.
Power and Tenant Risk: an Underwriting Focus
As a growing trend in U.S. data centre financings, power availability and tenants’ profiles are now central to credit underwriting.
Investment-grade tenants under long-term leases backed by parent guarantees and other comfort letters are increasingly needed to ensure the stability of the data centre developer and its tenants on a long term basis. In addition, a great focus is being put on power supply / infrastructure diligence and the tenants’ related termination rights to their lease or colocation agreements in case of failure or delays in the delivery of power – with some tenants even accepting to relinquish such termination rights and protections and sharing the risk of power supply delays with the developers.
European sponsors and lenders could expect similar scrutiny, especially as power grids are subject to constraints, with a new wave of arrangements with energy suppliers and tenants to reduce such risks.
Equity Commitments and Leverage: High, but Guarded
Despite the rise of joint venture arrangements between private equity houses (and their dry powder ready to deploy) and data centre developers and energy providers (contributing their industry, assets and expertise), data centre construction and optimization remains a costly enterprise, requiring additional funding sources from banks and direct lenders able to provide financings in high loan-to value / loan-to-cost conditions. Recent U.S. financings we have seen have pushed leverage boundaries, with loan-to-value ratios on such transaction reaching up to 65% and loan-to-cost ratios as high as 80%, while equity contributions ranged from 15% to 20% – some of which included equity commitments to provide further contributions post-closing.
These structures reflect a U.S. financing market willing to stretch on leverage for high-quality sponsors, owners, developers, operators and tenants, but only with robust long-term equity backstops (such as sponsor guarantees and otherwise conditioning future advances to additional equity contributions) – to ensure these real estate-backed financings would not be classified as High Volatily Commercial Real Estate (HVCRE), requiring some lenders to hold more capital against them.
As European sponsors increasingly seek U.S.-style leverage or structures, some European lenders might look to mirror these equity-to-loan and equity backstops features to ensure regulatory efficiency and reduce the impact of similar capital adequacy rules and related capital charges.
A U.S. Blueprint for European Data Centre Growth
These U.S. financings show that scale, structure, and market players’ quality can unlock deep pools of capital. For European market participants, they signal a shift toward more power-aware and tenant-resilient financing structures.
As digital infrastructure demand accelerates, these precedents are likely to shape the next generation of European data centre financings.
The authors are Sebastien Bonneau (Partner, Data Centres, London) and Sophie Rezki (Senior Associate, Finance, London) with the US law firm McDermott, Will & Emery
