The Zhitong Finance App learned that AI computing power supplier Coreweave (CRWV.US) plans to raise at least US$4 billion through an investment-grade loan after raising its annual sales forecast and mitigating investors' concerns about its heavily indebted business model.
According to people familiar with the matter, Morgan Stanley and Mitsubishi UFJ Financial Group (MUFG) are taking the lead in promoting this potential financing, and the loans will be distributed to investor syndicates in stages. The deal may enter the market as early as next week, but the plan has not yet been finalized and may still be adjusted. Since public statements were not authorized, people familiar with the matter requested anonymity. CoreWeave and Morgan Stanley spokespersons declined to comment, and MUFG did not respond to requests for comment.
Why can “junk” companies borrow “investment grade” prices
The company, which is still classified as junk, previously relied heavily on high-yield bond market financing for its data center expansion. But it was able to lock in lower borrowing costs by using chips and related contracts as collateral for debt — a structure that is expected to continue into this new financing.
The logic behind it is uncomplicated: CoreWeave provides computing power to companies like Meta Platforms, and long-term contracts with these major customers provide definitive cash flow support for creditors. In March of this year, the company received an investment-grade financing of $8.5 billion thanks to the endorsement of a Meta customer contract. The loan is divided into two parts: the spread for the variable interest rate portion is 2.25 percentage points above the Guaranteed Overnight Financing Rate (SOFR), and the financing cost for the fixed rate portion is approximately 5.9%.
Performance guidelines exceeded expectations, and both stocks and bonds rose
On Tuesday, CoreWeave expected this year's revenue to reach 13 billion to 13.3 billion US dollars, not only exceeding the company's previous guidance range, but also far exceeding Wall Street's average forecast of 12.9 billion US dollars. Company executives also said they expect to get another loan with an investment grade rating in the near future — a characteristic that is expected to allow them to borrow at lower interest rates.
At a time when market anxiety about whether huge investments in AI infrastructure will pay off — and CoreWeave is at the center of this storm of anxiety — the deal will be a direct test of investors' appetite for debt. After the financial report was released, the company's stock price soared sharply on Wednesday, and bond prices also rose in response.
According to preliminary discussions, the issuance yield of the new financing is likely to be between 7% and 7.5% — a figure the company revealed during an earnings call with analysts on Tuesday. This level is only about half of the yield on existing junk bonds.