> (…) this is functionally Meta borrowing $27.30 billion for a campus no one else will touch, packaged in legal formality precise enough to satisfy the letter of consolidation rules and absurd enough to insult the spirit.
> The structure maintains a precarious technical separation that, under current interpretations of accounting guidance, allows Meta to keep roughly $27 billion of assets and debt off its own balance sheet while continuing to provide every meaningful form of economic support.
And then going to the comments, excitedly no less, to find…this?
Jfc :’(
1. Facebook creates a shell company.
2. The shell company borrows billions of dollars, and builds a data center.
3. Facebook leases the data center.
4. The fact that it is technically only a four-year lease with only one possible tenant can conveniently be ignored, as Facebook assumes essentially all possible risks. The shell company could only possibly lose money if Facebook itself goes under, so the lenders can treat the loan as just as reliable as Facebook itself.
5. Because Facebook technically only has a four-year lease, it can pretend it doesn't actually control the shell company: after all, it can always just decide not to renew the lease. The fact that is assumes essentially all possible risks can conveniently be ignored, so Facebook can treat it as a separate entity and doesn't have to treat the debt as its own.
So the lenders are happy because there's no real risk to them, and Facebook is happy because they can pretend a $27B loan doesn't exist. It's a win-win, except for the part where they are lying to their shareholders about not taking on a $27B loan.
ChatGPT isn’t really a solution because the source is both low quality and has questionable motives. Going to any of the other good articles on the subject that have been linked in this comment section is much better.
The target audience is people who want to be angry at Meta and think that they’re smarter than finance people.
> We assign a preliminary A+ rating to the notes, one notch below Meta’s issuer credit rating,
It’s hard to get away with that when the report is attributed to a company and person which don’t seem to exist, hosted on some randos substack. Wording like that works way better when it comes from a sender with an address ending with @bigbank.com
Of course, the latter parts of the post (Disclaimer and Limitation of Liability) do reveal pretty definitively that this is obviously not intended to be a serious report.
As for the content itself? The author tries really hard to turn a whole lot of nothing into something, and horribly misinterprets the GAAP in the process.
Things that are hard to read because you lack context is not the same as poor writing.
The actual subject matter has already been covered well by good writers like Matt Levine, WSJ, and others.
What on earth does your second sentence have to do with the quality of the writing? Try just a bit to separate your emotions from the text.
Not to mention that asking help to explain a text is extremely common. I can read English, but I have never read a US supreme court ruling. There are much better ways for me to understand those rulings to me as a non-lawyer.
The most publicly notable cases (on things like abortion, gerrymandering, gun control, etc.) aren’t so tied down in complex precedent or laws the average person is unfamiliar with.
Although, even some of those (like, for me, issues around Native American sovereignty or maritime law) are quite readable as well.
Having admitted to never having read a SCOTUS ruling, how can you then proclaim there are better ways for you to understand? How could you possibly make that assertion if you've never read a SCOTUS ruling?
A SCOTUS ruling is a primary source, and there's a pretty good universal rule that primary sources can be difficult to properly digest if you don't fully have the context of the source; for most people, reading a secondary source or a tertiary source will be a superior vehicle than the primary source for understanding. Although that said, some secondary and tertiary sources do end up being just utter garbage (a standard example is the university press release for any scientific paper--the actual merits of that paper is generally mangled to hell.)
I guess the last refuge of the ignorant is denial
News article: 500 words that provide everything I need to know.
Unless I am actually very interested in the ruling, this seems an easy choice. Because I just wouldn't open that PDF file at all.
Wasn't that the root of the 2008 crash? The debt spiral was acceptable because people were making enough money in the present that regulators were powerless to advise against it. In a sane world people often go to jail for decades when doing this at pennies on the dollar.
On the other hand, Meta has great creditworthiness. And guarantees this vehicle. So... it's not the same.
This is debatable but subprime loans were mostly accurately rated. They were rated very low. That low rating was the ultimate precursor to the crash, because it means banks carrying those poorly rated vehicles needed to balance them with different highly rated vehicles to keep their own rating high enough to qualify carrying and lending other financial assets on their books. There were so many of these shitty loans that they had to repackage them to dilute their value/rating against their other highly rated assets, because there are limited number of highly rated assets any given bank could acquire at a moment.
That dilution was called a credit default swap, which is bundling under the guise of an insurance vehicle. This magnified the problem for two reasons: First these shitty assets can now be traded in large bulk and secondly any given bank can now carry more of them before further eroding their value. That proved catastrophic because this toxic debt could not be moved fast enough by anybody that held them. Its like hot potato or musical chairs, like Bitcoin. The only real difference between those credit default swaps and Bitcoin is only that everybody knows Bitcoin is intrinsically worthless and only exists as an instrument of speculation while many people actually thought these credit default swaps were real financial assets and that they were insured.
This is it. I can see TSLA and a lot of bitcoin vehicles have done it too. Combined with the extent of tech companies proportion of total S&P500 market cap, along with expected energy price increases due to usage, will lead to a huge drop of worldwide confidence in US stocks once this bubble pops.
Governments who do not take enough action to stop this behavior inevitably lead to this. The US credit rating may be at risk entirely.
I mean, yeah, but at the same time, and?
The lesson learned from 2008 was that no one was going to do anything of consequence to degenerate gamblers who kneecapped a generation's economic prospects. Then, in 2024, we doubled down on that position.
The behavior will continue until an effective consequence is introduced.
So? As usual, xkcd 1053 applies :) https://xkcd.com/1053/
The problem is that even standard practice, without nefarious intent, can cause massive financial collapse. If, say, the vast majority of economic growth were being focused into such vehicles, the lack of transparency could make people misanalyze the situation and result in bad valuations that collapse when it all becomes transparent.
> I should say that the big tech companies did not invent this technology to build AI data centers. This sort of thing — project finance, non-consolidated joint ventures, borrowing out of boxes — has a long history in a lot of capital-intensive industries.
Levine attributes a recent increase to private credit.
https://www.bloomberg.com/opinion/newsletters/2025-10-29/put...
RE throws off much income.
It's also difficult to transfer the RE to another entity without realizing gains.
I don't know enough about finance to tell for sure, but this seems backwards?
Downstream of the capex to build the data centre is, presumably, a sister capex to build a power station. At what stage do these come hand in hand? Or does this financing include provisions to pay the electricity bills for the next ten years which, in turn, gets used by the power company to finance the construction of a new power plant? The power company gets some kind of heads up?
If I finance the construction of a mile long dinner table due for late November 2026, presumably some of that had to trickle down into a local turkey farm, lest everyone go hungry?
Pedantically, that's one ninth of the Three Gorges Dam. One tenth would be the 0.3 Gorges Dam.
Mostly things like this, yeah. The hyperscalers don't want to get into the power business.
They would be surely rushing to invest in power infrastructure and use the AI scare (military need) to push through legislation. If they aren't doing this, they must be predicting the demand won't follow through...
https://bsky.app/profile/mailia.bsky.social/post/3lwys6d6r6s...
As has been mentioned though if you purely want the info there are more succinct articles out there, e.g.: https://www.forbes.com/sites/petercohan/2025/11/25/metas-ai-...
What's very interesting to me is what happens when Meta doesn't exercise those lease options. If there isn't some kind of penalty for declining the option, well...
> The bonds for the Hyperion data center priced with a coupon of almost 6.6%, roughly a percentage point higher than Meta’s outstanding corporate bonds and in line with the average junk bond. That’s a higher yield than investors would expect given that S&P rated the Hyperion bonds A+, safely within the investment-grade spectrum.
Apparently the bond market is pricing the guarantees made by Meta to this other entity as not quite as good as bonds that Meta issues itself, and Meta is willing to pay the higher interest rate. So, not entirely a free lunch?
I guess sometimes a company wants to issue junk bonds and its rating gets in the way.
I've seen at least two different commercials each focused entirely on the personal story of a relatable, folksy person living in a small town in a fly-over U.S. state, talking about how the town was declining and times were hard - then Meta built a new data center nearby and this person along with many others got jobs there and now things are great. They are very well-produced with cinematic shots of rustic small-town main streets, dusty pickup trucks in rural settings and local high school football games. Aside from the obvious brand-washing, it would be extra on-brand if it turns out Meta doesn't even own the data center but still tries to take credit for it.
https://www.youtube.com/watch?v=xCVkA1xebrQ
It turns out the one in this ad is in Altoona, Iowa. The ad focuses on how it revitalized the community by providing jobs, kind of glossing over how that might be reflected in the massive facility's ~30 car parking lot.
And incidentally, that data center currently shows no open positions on Meta's career website, although third-party sites still have some dated listing for advanced IT positions that were probably filled by non-locals.
Ugh.
Lots of construction workers in the areas where they're putting up new buildings, though.
Also given the 24/7/365 nature of data center operation, the number of employees will be larger than the number of parking spots.
[0] https://corridorbusiness.com/data-centers-bringing-big-numbe...
[1] https://www.pa.gov/content/dam/copapwp-pagov/en/dli/document...
What? Me exaggerate? Never! :-) I did actually spend a minute looking for the commercial on YouTube but YT search sucks, so thanks for finding it. Setting aside the fact it's crassly manipulative corporate propaganda, as someone with a lot of film and video production experience, the production team that made it did very nice work. That's the only reason I actually ever even saw it. I normally skip through all commercials on the DVR, but I happened land on a couple of really nicely shot frames as I was skipping and rewound to see the spot. I thought, "Wow, blatant bullshit but great work!" :-)
"If you add two pounds of sugar to literally one ton of concrete it will ruin the concrete and make it unable to set properly which is good to know if you wanna resist something being built..."
Creating such bustling workplaces as https://maps.app.goo.gl/fc9AGtsVwiLA1vd88 https://maps.app.goo.gl/fHvTWK4rWqrsqsmr9 https://maps.app.goo.gl/RzggPfd3xbBQbdoo6 and https://maps.app.goo.gl/MBjun6ad4zJmmrRV7
These facilities will sometimes employ as many as 100 people - so a state that can attract three such data centres creates almost as many new jobs as an entire wal-mart store. Truly, a transformative number of jobs.
... wait, no, we're not. We're still an absolute shithole at the top of New York, now with a bunch of sea cans sitting in front of abandoned industry we lost decades prior, humming away doing nothing for any of us.
If I understand the explanations on HN, the complaint is that Meta is taking on debt, which would normally affect its credit rating, so they're "hiding" the debt in a LLC without materially changing anything. Thus, alleging that Meta is "faking" a higher credit rating than it should have.
However, it looks like this construct might actually protect Meta against the main two risks that might make the datacenter be unprofitable (force majeure like a disaster destroying it, or a collapse of datacenter demand), i.e. keeping the good credit rating may be justified because the construct is actually very different, protecting Meta from risk, even though the article suggests that it's just a fig leaf?
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.
this is the original report
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!)
Now that am thinking about it (not accountant) does a lease show as debt or not?
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.
It is a joke. This is a humor post on a comedy blog. This substack is not actually a bond rating agency.
This blog is in the "no man's land" of satire v. serious. Doesn't pick a lane and people get confused, but it's not funny, "bit the onion" confused.
That aside, I don’t think that this post by a made up bond rating agency called the Flexible Standards Group that uses phrases like “unbothered by reality” “downgrade when the shit hits the fan” is particularly difficult to parse as being humor (or at the very least not an actual bond rating)
It also has an eerie tinge of AI generated satire wrapping a real article.
Can't have nice things anymore...
That's right. The illiterate show up to shriek about things they don't understand.
IMHO it is very well executed, pushes the right buttons, and ultimately raises the question of financial realism (if the market acts like it's true is it true? how far is it from something that you can use to pay your taxes with? and so on)
It's a satire blog that's confusing or misleading people (See top HN comments.) and not getting strong reactions.
Poe's law is when someone's being sarcastic and they add a smirk emoji to avoid/seek -/+ votes. Feels different here.
I don't think the term really applies here, and I also despise the emoji copouts.
Is it confusing people though? Have you read the real one?
I think it’s equally possible that we have a blind-leading-the-blind situation here, ie one guy didn’t get the joke, posted a serious chat gpt summary, and some people assumed it was a serious article. Seeing as that was the top comment for a while, I’d bet that this discussion is a great example of how using LLMs to “understand” things can actually have the reverse effect.
It's more diplomatic than what I was getting to after struggling to not allude to modafinil or Asperger's.
For these datacenters to keep value without the computational demand, you also assume new hardware prices & capability will stagnate.
I still dont see the "total addressable market" being large enough to satisfy even one monopoly.
Well shall I break the bad news to you.. for the past few years this is starting to look more and more true, for server hardware at least (CPUs, DRAM, SSDs). Sure, you can get more (cores, GB of DRAM, TB of NAND) now in a same package, but also at a higher cost.
If this becomes the default template for AI capex, headline leverage stats for most of big tech are going to drift further and further away from their real balance sheets
stevesimmons•2mo ago