KUALA LUMPUR: Malaysia’s funding requirements for data centres and associated graphics processing units (GPUs) are expected to exceed domestic bank lending limits over the next three years, according to S&P Global Ratings.
Director of corporate ratings Yijing Ng said data centre operators in Asia-Pacific (APAC) have been heavily reliant on bank financing and equity, but banks were increasingly reaching their sectoral lending limits.
"Data centre growth is not slowing down, and we are now also seeing GPU financing in the mix for banks' lending books. From that perspective, there will be an inevitable shift from bank financing for digital infrastructure in APAC,” she said in a webinar titled ‘Digital Infrastructure: Global Financing Trends and the Asia-Pacific Outlook’ today.
Ng cited the United States as a benchmark for data centre financing and believes that structured finance, particularly asset-backed securities (ABS), could be an option in mature APAC markets with supportive regulations. "In mature markets with supportive regulations in APAC, we believe that structured finance, particularly ABS, could be a financing option for lenders and investors as a first port of call. This is because such funding mechanisms for data centres are already well-established, particularly in the US,” she added.
She said Australia, Singapore and Japan are among the markets in the region with an established track record of ABS issuances.
"One key limitation for structured finance is significant unmitigated construction risks where ABS typically holds a pool of stabilised assets. Therefore, where there is construction risk, we do expect that APAC operators may turn to project finance, or when there are bespoke structures, then they may choose the private credit route.
"I think given the stage of development of the market, we do expect that capital recycling and debt via REITs or funds could come more largely at a later stage of these operators' life,” she concluded. - Bernama
