3 ms·

someone has to service the debt, and Meta has obligations to pay if the company cannot find any other tenant - if I understood correctly

by pas 10mo ago

tgsovlerkhgsel 10mo ago
My understanding is that the residual value guarantee only covers "most modeled cases" and this case (which might be the only one where the datacenter could not be meaningfully utilized and the guarantee would be relevant) was the not-modelled one...
- caminante 10mo ago
  All scenarios are modelled. It's not complicated. The issue is the short, 4y renewal cycle, which allows Meta to attempt superficial arguments to avoid accounting consolidation for the variable interest entity that they...pretty much (a) control and (b) have skin in the game.
- pas 10mo ago
  https://www.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/101651795 https://www.spglobal.com/ratings/en/regulatory/article/-/vie... this is the original report https://longbridge.com/en/news/265411465?channel=WHAB0001 https://longbridge.com/en/news/265411465?channel=WHAB0001 > This arrangement comes at a steep price. The interest rate on these bonds is as high as 6.58%, significantly above the 5.5% yield of bonds from similar companies to Meta. so it's definitely not completely junk, but the market priced in the gap (though, for me, it doesn't seem that big of a price difference!)
csomar 10mo ago
How is this different from a 5-10 year lease? You can sell the car to someone (or the construct) and he continue to service the debt or you can service the debt. Now that am thinking about it (not accountant) does a lease show as debt or not?
- pas 10mo ago
  I think the point is that Meta really really wanted to avoid getting their credit rating downgraded, and ... went shopping for off-book financial vehicles. On one hand they (supposedly) have enough "discounted cash flow" to do whatever, on the other hand I guess even they know it's a bubble and fallow years are coming.

someone has to service the debt, and Meta has obligations to pay if the company cannot find any other tenant - if I understood correctly

by pas 10mo ago

someone has to service the debt, and Meta has obligations to pay if the company cannot find any other tenant - if I understood correctly

tgsovlerkhgsel 10mo ago

My understanding is that the residual value guarantee only covers "most modeled cases" and this case (which might be the only one where the datacenter could not be meaningfully utilized and the guarantee would be relevant) was the not-modelled one...

caminante 10mo ago
All scenarios are modelled. It's not complicated. The issue is the short, 4y renewal cycle, which allows Meta to attempt superficial arguments to avoid accounting consolidation for the variable interest entity that they...pretty much (a) control and (b) have skin in the game.
pas 10mo ago
https://www.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/101651795 https://www.spglobal.com/ratings/en/regulatory/article/-/vie... this is the original report https://longbridge.com/en/news/265411465?channel=WHAB0001 https://longbridge.com/en/news/265411465?channel=WHAB0001 > This arrangement comes at a steep price. The interest rate on these bonds is as high as 6.58%, significantly above the 5.5% yield of bonds from similar companies to Meta. so it's definitely not completely junk, but the market priced in the gap (though, for me, it doesn't seem that big of a price difference!)

csomar 10mo ago

How is this different from a 5-10 year lease? You can sell the car to someone (or the construct) and he continue to service the debt or you can service the debt. Now that am thinking about it (not accountant) does a lease show as debt or not?

pas 10mo ago
I think the point is that Meta really really wanted to avoid getting their credit rating downgraded, and ... went shopping for off-book financial vehicles. On one hand they (supposedly) have enough "discounted cash flow" to do whatever, on the other hand I guess even they know it's a bubble and fallow years are coming.