Meta's AI Spending Pushes Borrowing Costs Higher

(MENAFN- Daily Forex) Meta is borrowing at least $20 billion to keep paying for its AI build-out, and this time lenders are asking for more. Its longest bonds, due 2056, came about 2.2 percentage points above US Treasuries. That's roughly 0.9 points more than a similar Meta bond in April, according to reports on the deal.

Investors still want in: orders came to about four times the amount on offer. The message isn't that lenders are walking away. It's that AI money is getting more expensive demand, higher price: what Meta's deal shows

The dollar part of the deal is $15 billion, spread over five bonds from 2031 to 2056, and Meta is selling euro bonds for the first time. Orders peaked at about $58 billion. In April, a $25 billion deal drew $96 billion. So appetite is about the same; the price has gone up.

The reason is the size of the bill. Meta expects to spend $135 billion to $145 billion on capex this year, and it burned $2.12 billion of cash in the third quarter. On 30 October, S&P Global turned its outlook on Meta negative, citing uncertainty around spending and cash flow. It now sees cash shortfalls of $39 billion this year and $71 billion in 2027.

Bonds are only part of it. Meta has also priced $25 billion of new shares and $12.5 billion of preferred stock, and plans up to $60 billion more in share sales over time.2.2 points and 4x orders: the price lenders set

For a deal like this, two numbers tell you how lenders feel:

What they charge: about 2.2 points over Treasuries on the longest bonds. If the next big-tech deals come wider still, lenders are asking for more every time. How many want in: orders of about 4x. If that falls on the next deal, it's not just the price changing, it's the appetite.

Meta isn't alone. On Monday, Alphabet sold €6 billion of bonds at noticeably higher yields than earlier this year, and Oracle went looking for $10 billion with a sweeter deal for buyers. Earlier this year, Oracle raised $20 billion and Microsoft $25 billion risk: a credit downgrade and shareholder dilution

Strong order books make it look like AI spending is easy to fund. Here's what that hides:

Borrowing is getting pricier. On every $10 billion borrowed at that wider spread, an extra 0.9 points is roughly $90 million a year in interest. Shareholders are paying too. Up to $97.5 billion of new shares means each existing share owns a smaller slice. A downgrade is now possible. A negative outlook is a warning, and a lower rating would make every future deal more expensive.

What would show the worry is overdone

If Meta's new bonds trade better once they hit the market, or the next big-tech deal comes cheaper, the cost worry fades. If spreads keep widening, or S&P follows through with a downgrade, it grows. Meta's next spending update is the big test.

Meta can still raise money whenever it wants. The question is how much more it pays each time, and how long investors are happy to keep paying for the AI bet.

Sources: CNBC (3 Nov); deal terms as reported by Globe/Bloomberg and BigGo Finance (3 Nov); S&P Global (30 Oct) as reported.

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