Meta and PE giant Blue Owl join forces to raise $27 billion to build data centers, with BlackRock as one of the largest investors.

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Meta has partnered with private credit (PE) giant Blue Owl Capital to raise $27 billion through bond issuance for building data centers. This deal sets a record for the largest private bond issuance, highlighting the massive demand for capital in AI infrastructure construction.

On October 21, according to media reports, BlackRock, the world's largest asset management company, subscribed for more than $3 billion in bonds, making it one of the largest investors in the project. The bonds were arranged by Morgan Stanley and received an investment grade A+ rating from S&P Global Ratings, but the yield was as high as 6.58%, close to the level of junk bonds.

The project is named Hyperion, with Blue Owl holding an 80% stake and Meta holding the remaining 20%. Reports indicate that, through this joint venture arrangement with Blue Owl, Meta was able to keep this financing off its balance sheet—similar to the model Intel used last year when partnering with Apollo Global Management to raise $11 billion for its chip plant in Ireland.

The largest private debt deal in history

The Hyperion data center project completed its financing by issuing $27 billion in private bonds, setting a record for the largest single transaction in the private debt market.

According to sources quoted in the reports, bond giant Pimco was the largest buyer, subscribing for $18 billion. BlackRock subscribed for over $3 billion, becoming the second largest investor.

S&P Global Ratings gave the bonds an A+ investment-grade rating, mainly based on Meta's role as a project backer. However, the 6.58% issuance yield is far above the typical level for similarly rated bonds and closer to the pricing range of high-yield (junk) bonds, reflecting investors’ demand for a risk premium on data center projects.

The bonds were issued last week at par (100 cents), and by Monday had been valued at 110.2 cents, meaning that the first investors have already secured substantial paper gains.

BlackRock ETFs join in

A portion of BlackRock's bond subscription has flowed into its ETF products. Fund disclosure documents show that an actively managed high-yield ETF bought Hyperion bonds last week, with holdings valued at $2.1 million as of Monday—making it the fund’s single largest investment target currently.

Additionally, a BlackRock total return ETF holds about $1.2 million of the bonds, while a loan ETF holds about $651,000.

After the 2008 financial crisis, BlackRock bet that ETFs would replace mutual funds as the preferred tool for institutional and individual investors, a strategy that propelled it to become the world’s largest asset manager.

Its iShares series of funds alone manage over $5 trillion in assets. ETFs are traded on exchanges like stocks and enjoy certain tax advantages.

Off-balance-sheet financing model

According to sources cited in the reports, by forming a joint venture with Blue Owl to issue bonds, Meta was able to keep this financing outside of its balance sheet. This structure allows Meta to pursue large-scale data center construction without directly increasing its formal debt load.

Intel adopted a similar model last year, partnering with Apollo Global Management to finance an $11 billion chip plant in Ireland.

Such off-balance-sheet arrangements are becoming a new option for technology companies to finance capital-intensive AI infrastructure projects, as they allow for the raising of huge sums of money while maintaining flexibility in financial statements.

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