Applied Digital subsidiary to offer $2.35 billion in senior notes

DALLAS - Applied Digital Corporation's (NASDAQ:APLD) subsidiary, APLD ComputeCo LLC, announced Monday its intention to offer $2.35 billion in senior secured notes due 2030, subject to market conditions. The debt offering comes as the company, currently valued at $8.66 billion, operates with a moderate debt level of $700.21 million and a debt-to-equity ratio of 0.67, according to InvestingPro data.

The private offering will be made to qualified institutional buyers under Rule 144A of the Securities Act of 1933. According to the company's press release, proceeds will fund construction of two data centers at its Ellendale, North Dakota campus: a 100-megawatt facility (ELN-02) and a 150-megawatt facility (ELN-03).

Funds will also repay existing credit agreements with Sumitomo Mitsui Banking Corporation, establish a debt service reserve account, and cover transaction expenses.

The notes will be guaranteed by APLD Compute's subsidiaries and secured by first-priority liens on substantially all assets of APLD Compute and its guarantors, along with equity interests and project accounts.

Applied Digital, which designs and operates data centers for artificial intelligence and other computing workloads, will provide completion guarantees for the facilities, committing to fund APLD Compute as needed to ensure timely completion. Analysts anticipate substantial revenue growth of 114% for the company in the current fiscal year, despite its current gross profit margin of 22.61%, which InvestingPro identifies as relatively weak.

The notes have not been registered under the Securities Act and may not be offered or sold in the United States without registration or an applicable exemption. The offering remains subject to market conditions, with no assurance of completion.

Applied Digital operates high-performance data centers for AI, cloud, networking, and blockchain workloads from its headquarters in Dallas, Texas.

In other recent news, Applied Digital has completed the first phase of its Polaris Forge 1 AI Factory Campus in North Dakota, achieving Ready for Service status. This initial 50 megawatt phase is part of a larger 400 megawatt deployment under lease agreements with CoreWeave, expected to generate approximately $11 billion in lease revenue over 15 years. Additionally, Applied Digital has secured a significant 15-year lease agreement with a U.S.-based hyperscaler at its Polaris Forge 2 Campus, valued at around $5 billion for 200 megawatts of IT capacity. The hyperscaler holds a first right of refusal for an additional 800 megawatts, indicating potential future expansion. In a related development, Babcock & Wilcox has agreed to deliver one gigawatt of power for an Applied Digital AI facility, with the project valued at over $1.5 billion. This project will involve the installation of four 300-megawatt natural gas-fired power plants. Furthermore, shareholders at Applied Digital's annual meeting approved an increase of 15,000,000 shares of common stock under the company's 2024 Omnibus Equity Incentive Plan. These recent developments highlight Applied Digital's strategic moves in expanding its AI data center capacities and securing substantial long-term revenue streams.

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