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Is Meta actually obligated to repay the loans or not? That’s how you can decide if this is disingenuous or not. If Meta is obligated to repay the loan and used
by CPLX 10mo ago
Is Meta actually obligated to repay the loans or not?
That’s how you can decide if this is disingenuous or not. If Meta is obligated to repay the loan and used to synthetic means to get it off the balance sheet that’s a problem.
If they have in fact successfully transferred risk to other parties then that’s what deals like this are for. It’s the whole reason the concept of limited liability exists.
I am fully willing to believe it’s the former. But that’s the test.
- xmprt 10mo agoEven if they aren't obligated to repay, they have to in practice because it'll impact their ability to get loans in the future. If the shell company declares bankruptcy and gets the loans off Meta's books no one will ever loan money to Meta again.
- Aurornis 10mo agoThey would still be able to get loans, but the terms would be much worse. Basically, if we’re reading about it from substacks and Matt Levine’s newsletter then it’s already fully common knowledge in the finance world.
- loeg 10mo agoEh, debt investors have short memories. They buy 100 year bonds from Argentina, for fuck's sake. It might limit Meta's ability to do this SPV trick.
- loeg 10mo agoI don't think Meta has a debt relationship with the loans involved here; that's the point. It does have strong contractual obligations to the wrapper business, though.
- gruez 10mo ago>Is Meta actually obligated to repay the loans or not? They aren't, but they're obligated to pay leases for it (they can't just build the datacenter and then walk away), which is kind of like having to repay the "loans".
- jfengel 10mo agoI'm not an accountant, but "contractually obligated to pay" sounds like a debt to me. If the Generally Accepted Accounting Principles don't require that to manifest on the balance sheet, then it sounds like the principles aren't very good ones.
- CPLX 10mo agoIt’s not though. Signing a lease isn’t debt. If you rent an apartment you haven’t taken out a loan from your landlord. Being conceptually similar isn’t the same thing as identical.
- tgsovlerkhgsel 10mo agoTo me it reads like the article intentionally pretends two major risks (force majeure and datacenter demand collapse) don't exist, by quipping that "rating agencies historically treat as theoretical inconveniences rather than recurring features of the physical world" for the former and explicitly saying they ignored it for "methodological convenience" for the latter. If those have been offloaded to the LLC, wouldn't that be a pretty key difference?